It’s June, and the initial batch of junior bankers have arrived for their first banking job in London. By August, all of class of 2016 will have started their analyst training programme in the City.
But for the junior bankers starting out this summer – and those one or two years into their careers – today’s Brexit vote brings fear, uncertainty and, at the very least, the prospect of a move to Frankfurt, Paris or Dublin.
“I spent four years getting to this stage, interning three times in London before finally getting an offer – now this,” says one analyst from a European university who started on a rotational scheme in January. “London’s supposed to be the place to aspire to and an interesting place to live, moving to these other locations simply isn’t as appealing.”
The competitiveness of London as a financial sector will undoubtedly be affected. J.P. Morgan said a quarter of jobs could go, Goldman Sachs has threatened to downsize in London and Morgan Stanley has said it’s likely to shift its European HQ out of the City.
“It’s a big concern,” says one graduate who’s about to start at an investment bank in London this summer. “The pound will fall, which means we’ll have less spending power, and London’s reputation has just taken a big knock.”
However, one third-year analyst who works in IBD is less concerned about the impact on any advisory roles. Trading roles and associated infrastructure could be shipped to continental Europe. Advisory roles, he suggests, should stay in London.
“So far, we’ve had reassuring – if political – messages from management that all we be relatively OK. No one in advisory functions is particularly worried. U.S. and UK banks at least will have little incentive to move all these functions elsewhere or shift their HQ, they want these people in one place,” he says. “If there’s a point when I have to move out of London, it’ll be because London is no longer a good place to be.”
More pressingly, offers extended to new analysts this year could no longer be set in stone. In the aftermath of Lehman’s collapse, many investment banks simply rescinded offers to junior bankers due to start on their analyst programme. However, this led to a shortage of mid-ranking bankers in later years, so most firms have been reluctant to make wholesale cuts to their graduate intakes since.
For this year's summer interns, subdued activity across M&A, ECM and DCM means that full-time offers will be harder to come by.
“The problem is that banks base their hiring decisions on the short-term outlook, rather than the long-term view, which is very uncertain now anyway,” says the third year analyst. “This means it will be much harder for the interns to convert this year. Banks might realise they have a shortage of analysts later, but they’ll just have to deal with it then.”
One headhunter in London estimates that around 60% of analysts coming into graduate programmes annually are foreign students – most from EU countries.
“Most junior bankers offered a job in another European financial centre will go,” adds Andrew Pringle, director of headhunters Circle Square Talent. “What choice do they have? It might not be as exciting as London, but I think most analysts wouldn’t have a problem with moving.”
Investment banks have been cutting headcount even before the EU referendum raised its head. At the junior end, those affected by cuts have been confident of securing a new role and have been attempting to negotiate on salary expectations.
“One associate had an offer for £80k, and they were trying to push it up to £90k,” says one headhunter. “They called me this morning saying they’d take £80k.”