Most investment banks in London are still fretting over when to trigger Brexit job relocations or how many roles to move, but they’re facing another problem – the UK’s decision to exit the EU has caused its main engine of junior talent to splutter.
Brexit has dented investment banks’ appeal among students in the UK, with applications slipping by 15.8% year on year for their 2017 graduate programmes, according to new research from High Fliers, which surveyed over 20,000 final year students at the UK’s top universities. Just 9.6% of graduates applied for roles in investment banking - the lowest proportion since 2009 when banks halted graduate recruitment in the aftermath of the financial crisis.
One of the biggest slumps has been from students at the London School of Economics, according to Martin Birchill, managing director of High Fliers. In 2012, 41% of LSE graduates applied to investment banking. This year, the number one choice is consulting – 41% have applied to this sector – while 29% are attempting to break into banking.
LSE’s dominates analyst classes in the City. Our own analysis of new front office analysts at top London investment banks shows that it accounted for 20% of the class of 2016 at Goldman Sachs, 22% at Credit Suisse and 18% at Deutsche Bank. It was the number one university at every bank we analysed.
“In the weeks and months after last summer's Brexit vote several of the City’s best-known investment banks stated very publicly that many of their London-based jobs could move elsewhere in Europe when the UK leaves the EU,” say Birchill. “This fuelled real concern and uncertainty amongst final year students looking for their first graduate job after university.”
Few banks have formally announced plans to move jobs out of London since the Brexit vote, despite suggestions that 9,000 roles are likely to relocate. Goldman Sachs said that at least 200 jobs could go to Frankfurt, while HSBC’s chief executive Stuart Gulliver reiterated the bank’s intention to move 1,000 UK jobs to Paris yesterday and Societe Generale said it was considering moving 400 London roles back to France.
However, investment banks have cut their graduate vacancies this year, by 3.2% on 2016 or around 67 roles, suggests High Fliers, while Big Four firms have expanded their programmes. Top students therefore “have better options in consulting”, says Birchill.
Whether investment banks feel the immediate impact of this is debatable. Their graduate programmes are already vastly over-subscribed, with only 2-4% of applicants making it into a full-time role. J.P. Morgan told us that there’s been a 50% uptick in applications for its investment banking graduate programme over the past two years globally, while Goldman Sachs had 130,000 applications for 5,000 internships.
Most students going for a job in London expected a starting salary of £32,000, says High Fliers. Investment banks have a massive edge here – starting salaries are £50k in London, with a bonus this year of £28k, according to recruiters Dartmouth Partners.
“Investment banking is still incredibly competitive,” says Logan Naidu, CEO of Dartmouth Partners. “You can earn £100k after three years and that’s difficult to compete with. Most banks’ main issue is retention – the attrition rate to hedge funds and private equity is a lot higher than in previous years.”
One student who interned with Goldman Sachs tells us that there’s still “overwhelming demand” among university students to get into banking, but that there’s also a greater concentration of people going for “high paying roles in technology, where the working environment is better.”
So, what is the motivation to get into banking? “I think most people would be lying if they didn't say that the pay associated with roles in banking was an influential factor,” says the student. “And a lot of people aspire to start a company in the future and having the contacts, experience and capital to do so is something that banking offers in abundance.”
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