Summer in the City – how are the opportunities for Oxbridge students being affected by financial uncertainty?

The media is currently dominated by talk of the effects of the ‘credit crunch’ on firms and jobs in the economy. What students and candidates at Oxbridge want to know is “how will this impact upon the opportunities for me?” A slowdown can affect both internships and graduate roles, cutting across sectors and undermining the working environment for new analysts. At the same time, they can tilt the trade-off between smaller niche employers and larger established firms. This week, beyondoxbridge.com provides a rundown of how the market turbulence might affect the decisions and options facing top students in the months ahead.

The first message is that, repeated by various sector experts, recruiters and first year analysts, was that there are fewer opportunities for new joiners, and that positions at the worst affected banks are even sparser. While lucky analysts at finance firms are being offered voluntary short sabbaticals, elsewhere redundancies are significant.

Last week, the Financial Times reported how Goldman Sachs, one of the world’s best known banks, was cutting staff in M&A and corporate fundraising by ten percent. The Centre for Economics and Business Research anticipates 11,000 job losses across all positions in London this year, and a further 8,200 in 2009. A second year analyst, laid-off from a well known investment bank, recently told beyondoxbridge: “It was sort of expected; American banks cull people after two years.”

Industry-watchers have noticed an impact on the number of opportunities for candidates. Craig Abrahams, manager of the Commerce and Consulting desk at OxbridgeGroup says: “There is a downturn – in previous years big banks, consultancies and companies have taken the opportunity to top up their ‘milkrounds’ at this time of year as extra resource is required or people drop out. However, such top-ups are few and far between this year - with workloads unpredictable, firms are no longer confident that there will be enough for everyone to do if they hire more people.

Mixed evidence on remuneration….

Earlier this month, e-financial careers posted an article claiming that analyst bonuses for finance firms would be nearly halved in the wake of financial market turbulence. They compare analyst base salaries of £38,500 and an average bonus of 125%, provided by the Cornell Partnership, with figures for a ‘top performer who has avoided the credit crunch’ of £37,000 with an average bonus of 70%. It was also reported that some analysts would be receiving a proportion of their bonuses in stock. It makes you wonder, if your firm is offering you stock out of distress, you’d have to be pretty confident of their future performance to be pleased with these options, especially at a time when many big banks are implementing further rights issues. It ties your remuneration, both your salary and your ‘investment’, with the performance of your employer, essentially putting all your eggs in one basket.

This paints a bleak picture of the direct effects of the credit crunch and ensuing economic environment on the prospects for candidates seeking finance jobs. However, is this too pessimistic? One source at a financial recruiting firm claimed that salaries and bonuses in investment banking had actually stayed flat this year. Indeed, 2007-08 remuneration at one of the top London banks (which particularly prioritises Oxbridge candidates) was the same as for the 2006-07 in take. Salaries are actually going to be higher for the 2008-09 cohort.

Of course, some bankers have suffered more than others. The bonuses received by recent recruits to the big banks in areas such as private wealth, as well as various middle office positions, have been sharply down or non-existent. The very top traders in the highest performing teams have seen high bonuses again, while firms have been happy for their colleagues to receive much lower remuneration, safe in the knowledge that external opportunities are limited. Then, of course, there are the leveraged financiers, a sub-sector that has been hit particularly hard by the credit crunch and which has seen a high rate of redundancy.

So, how can students compare the risks in one sector to another?

One feature of the 2003-07 boom in the City was the rapid growth of previously lesser known financial opportunities, for example with hedge funds or in private equity. Smaller firms at the cutting edge of innovation in the City were, and still are, attractive for top Oxbridge candidates. While the volatility might give the edge back to established firms who can provide short-run incubation for young graduates, lesser known firms that are not necessarily known for recruiting new graduates have in the past year been looking for younger faces as well. One top Oxford graduate recently told www.beyondoxbridge.com that he had chosen to start his career in the corporate finance team of one the large accountancy and consulting firms, partly because their training programme offered transferable skills and a relative safe-haven in the current financial climate.

The greater attention to careers risk is seen on the part of recruiting firms as well. Mr. Abrahams at the Oxbridge Group says that “… smaller companies that recruit on an ad-hoc basis are continuing to hire if their team is growing or to replace people who leave. However, the current trend is to take people who have up to a couple of years of indirectly related work experience and who want to move into the new company's sector: hiring someone proven and exposed to the working world is a less risky option than taking a fresh graduate.”

Despite this, the interesting and dynamic opportunities remain out there. Mr. Abrahams continues: “Among advisory firms (i.e. banks, consultancies and agencies), specialised companies are gaining ever increasing traction in the marketplace as sector experts are successfully selling their business to big companies. In London especially, there is a large number of boutique sector-specific firms, whose work is just as high quality as the big companies and where you may actually learn more as you are thrown in at the deep end… Whilst these smaller firms are also suffering in the credit crunch, there are enough of them out there to ensure that positions will continue to be available; also because they are less well known they receive fewer applications per position as compared with the large global brand names.”

Joining a small firm taking on a handful of new starters may be a safer option in the current climate. There might be greater risk in joining one of the big firms with 60 others, where it is harder to stand-out from the crowd and you are, on average, a cheaper investment for your employer.

Difficult working conditions

One area that applicants and candidates should not overlook is the impact on the working environment of a firm which has taken a big hit from the crisis. This is especially important for analysts and junior staff hoping to begin their career in a positive working environment.

A first year analyst at one of the big banks affected by the credit crunch, who wishes to remain anonymous, chose to work for them because they were an international company with great grad-programme. He says: I settled in just fine; they promoted our development early-on and we gained a lot of responsibility. I was very optimistic.

Towards the end of 2007, though, the impacts of global financial turbulence became impossible to ignore. “Working in finance, I was aware of the problems in the global markets and in my company in particular. Being the ‘young cheap labour’ you always believe your job is relatively safe especially since our graduate programme lasts for two years. The only first indication of job security being a problem was when grads actually got laid off.

“Various numbers of my peers have had to leave. The atmosphere in the office is tough, and the lay-offs have affected morale. The people that remain behind can’t be sure that their jobs won’t be gone in the next couple of months, so everyone is rather on edge. Since the company emphasises bonus compensation, and these are likely to be minimal this year, many people are working really hard for relatively little compensation.

“While it is a bit grim, people have developed a sense of “gallows humour” which helps us to get through the day.”

It’s not just job security and the working environment that applicants should consider, but also career development: “A big problem is that people are losing confidence in senior management to pull things around, so firm loyalty is suffering. Managers were made redundant rather than fired. Because most people will struggle to get another job, they would rather stay while unhappy rather than face the outside world. In the current environment people are willing to make large sacrifices in order to keep their career on track.

So are these problems making alternative options more attractive? Our insider thinks this is a complicated issue: In the current environment finding another job is very difficult – the only way would be to start again as a grad which I wouldn’t want to do. What’s more, it's even harder to get a graduate job as people are hiring fewer starters.

Being ambitious and interested in finance, only something in the City would really do. I am hoping to ride the wave and come out of this with my job and career in-tact. The main problem with finding another finance job is that all the other City-professions are scaling down on their people: consultants, marketing – everything is scaling down.

The story is not unique. The e-financial careers article mentioned above says that The Cornell Partnership are receiving calls from analysts saying that they’re bonuses are down 25%, people are leaving the team, expectations are unrealistic and workloads are unbearable.

Diverse picture outside of banking and finance…

Of course, not all sectors are affected in the same way, while some will emerge unscathed. An analyst at a well known strategy consultancy in London claims that they are as busy as ever, although the economic slowdown has meant that top-firms are taking on work that they might not otherwise have considered. This has obviously changed the nature of the work undertaken, for example with more visits to client sites than is usual for the firm. Another analyst at a different strategy consultancy, who have seen a sharp downturn, has noticed the decline of various corporate perks, from team building and ‘away-day’ events overseas to cutbacks at Friday night drinks.

It’s not just the City firms who are feeling the pinch. Many London advertising agencies who prioritise Oxbridge graduates have seen their own clients cut back on marketing budgets. The slowdown has had an indirect impact on work in this sector, although it does not seem to have filtered down to recruitment as yet, with these firms taking on two to six people at a time.

Yet there are also niche sectors, even related to finance, where the pinch is not yet being noticed. One recent recruit to a financial consultancy whose clients are mostly public sector or operate in international development told beyondoxbridge that their operations are well insulated from the problems. On the contrary, some bodies such as regulators need further assistance to assess the impact of the turbulence their own operations. His company, albeit a small one, are recruiting as normal.

‘A’ job, or ‘the right’ job…?

One message seems to be that, for Oxbridge candidates looking for the top finance jobs, there are still the lucrative and diverse opportunities out there. At the same time, the credit crunch means that there will be more competition among applicants.

Mr. Abrahams reinforces this point: “… three boxes need to be ticked in order to get a job offer: you need to be inherently intelligent enough to do the job, you need to be interested in the work that the company do and you need to fit in with the culture and values of the team and company. This has not changed. What has changed is the number of roles available – whereas in past years you may have got away with 2 out of 3 of the above, companies are now only hiring if they are totally convinced that the individual is 100% right for them.”

While offers may be harder to come by for new applicants, it remains as important as ever for an employer to meet their needs as much as vice-versa. Finding a job shouldn’t be the ultimate goal of the Oxford or Cambridge student. Given the skills, ideas and motivation that they bring, the aim should always be to find the right job for them, something that has become more important, not less, due to the credit crunch. Most analysts will be put-off by an uncertain working environment, where their long-term position is uncertain. And what is clear is that uncertainty is not confined to small firms, but maybe more so in the large and well-known recruiters.

So, as ever, students should want to know as much about their options and about the firms to whom they apply as possible. Similarly, smaller and more niche firms will be looking for more targeted recruitment of interns and students, whether harmed by the slowdown or not. This is why the innovative services provided by beyondoxbridge are as vital as ever. Despite fewer jobs available at the worst-hit firms, you still have more options than you think…

Here are some other interesting articles…

http://www.ft.com/cms/s/0/4b0e96b2-4093-11dd-bd48-0000779fd2ac.html?ncli...
http://news.efinancialcareers.co.uk/newsandviews_item/newsItemId-13971
http://news.efinancialcareers.co.uk/newsandviews_item/newsItemId-13937