Slaves and the City: graduates working at top firms for free

Published on: 21 May 2012

A job in the Square Mile used to be a guarantee of riches and success — but to get on the ladder some new graduates are working for free at London’s top firms.

In the days before the crash, when the City of London looked like a real-life version of Opportunity Knocks, the hiring game for the best new graduates at top investment banks often played out like this: the recruiter charged with slimming down the towering pile of applications would pick up half of the many hundreds of CVs on his desk — and dump them in the bin. He would then start wading through the rest to see who was a hopeful and who was a no-hoper.

If that sounds brutal, it now represents a golden age, as at least half of those applicants had some sort of chance. These days there are next to no jobs for graduates in the City. Recent figures from the Centre for Economics and Business Research found that financial sector jobs in London have fallen to their lowest level since 1996.

And for those lucky enough to secure a rare position, they have to quickly lose their previously reasonable belief that a job in the City is the best way to wipe out student debts swiftly. One trading floor recently hired a string of top-notch maths PhDs on £20,000 a year. Another firm is said to have taken on graduates for as little as £6,000 a year, with a promise to pay for stockbroking exams on top of a salary that leaves some worse off than when they were students.

“No one is really interested in graduates,” says Stephen McCarty, managing partner at City recruiter BBM Partners. “There is simply no appetite for them. In 2009, a large number of the graduate intake who were due to start in September were asked to defer, and I imagine this will happen again for those people due to start in September this year.”

The grads are being hit by a double whammy. There’s a low level of recruitment at the bottom and increased insecurity in the middle. With the squeeze on at City firms and job cuts rife, senior people desperate to keep their positions are doing the grunt work that might otherwise have kept a bright new hire occupied. And the few grads taken on in recent years know they are at risk.

“The vast majority of job cuts during the last market dip were at vice-president and associate level. This time we are seeing graduates who have been with financial services organisations for six to 18 months becoming surplus to requirements,” adds McCarty.

So the pool of talent keeps widening. This year’s grads will compete for jobs with each other and with those still unemployed grads from the past two years. You don’t need to be a maths whizz to see what that does to salaries.

The situation is so bad that headhunters, normally keen for publicity, are suddenly coming over coy. “Leave me out of it, can you?” says one. “I don’t want a thousand graduates phoning me for jobs I haven’t got.”

What recruiters say in private is that Oxford and Cambridge candidates with a First are still likely to get something, but it may not be the job at Goldman Sachs they had expected; more likely one at a smaller firm of which they had previously never heard. Such boutique organisations can hardly believe their luck.

However, even just getting an entry-level job that many a bright spark may think is beneath them is tough, and some are looking at other options. According to findings from a recent survey of more than 25,000 UK students, financial services companies have been pushed out of new graduates’ lists of the top 10 most desirable employers. Tech companies, such as Google, intelligence services, such as M16 and M15, and charities — where a lower wage is perhaps offset by working for a socially conscious cause — have now overtaken the likes of Deloitte and Ernst & Young.

And back in the financial world, budgets are being watched so closely, no one wants to be responsible for hiring someone who can’t cut it, so even lowly positions require the successful applicant to meet senior managers for the nod of approval.

The hoops young applicants are asked to jump through to get a job are ever more onerous. One graduate, recently chasing a position, thought he had got the job. After a telephone interview, a face-to-face interview, a four-hour exam, a conference call with managers in the US and then a weekend-long project — they hired someone else.

McCarty says those with quirky backgrounds or skills have a better chance: “I recently placed an Australian guy who was a professional swimmer — he’d been in the Commonwealth Games. In a small investment bank, he stood out.”

But those who can’t swim at world-record speed may need something else, as a First from Oxbridge may no longer be sufficient on its own. This is changing the very character of the Square Mile.

Until recently the City could claim to be some sort of meritocracy. The old school tie helped, of course, but it was eminently possible for bright, hard-working folk from poor backgrounds to get ahead, to make a fortune even. Now, to get a foot in the door you might have to work for free or at least on a salary that makes it hard to live in London.

“This results in City employees increasingly coming from families who are able and willing to support them for the first few years of their working life. It is hardly the social diversity and mobility the sector has been working towards,” says McCarty.

In some ways the situation is absurd. The banking sector has been blighted but it’s not as if the big firms aren’t still very wealthy institutions. That some of the richest companies in the world should be using cheap labour is an oddity not lost on those at the sharp end.

So if you want a City job is it even worth getting a degree? Terry Smith, once one of those kids from nowhere who has built a huge fortune after decades in the City, doesn’t have a graduate programme at his firm Tullett Prebon. “We require trainee applicants to take a numerical test and if they pass that then they proceed to interviews. The reason we have gone down that route is that we have experience of graduates from UK universities who can’t do arithmetic to an acceptable standard,” he says. The average starting salary for Tullett trainees is about £25,000, he adds. That’s far from a fortune but at least it’s a start.

Those still dreaming of one day becoming swaggering, globetrotting deal-makers — Zurich for breakfast, New York for dinner — might find all of this dispiriting. Though Goldman Sachs, for example, insists it is still hiring, most banks have trimmed their graduate recruitment programmes and some (those that said they were going for growth in Europe but are now having second thoughts) are said to have quietly ditched them all together.

The bad news is that this trend may be about to get worse. Sarah Butcher, of, says: “The extent of this pull-back hasn’t really been felt yet. Banks typically hire students on the back of summer internships and this year’s classes are still quite big. The real crunch will come when those summer interns try to get graduate offers — at that stage, it may become apparent that there are a lot fewer jobs to go around.”

Some may welcome the idea that Britain’s brightest young people may now seek work away from the financial sector, perhaps instead devoting their working lives to curing cancer, say. But those intent on a job in the City perhaps shouldn’t be too despondent: busts are always followed by booms. At least, they always have been before.