Since a record-breaking rise in 2022, salaries and bonuses in UK investment banking have remained stubbornly static, moving up (and even down) by only a couple of percentage points.
However, this doesn’t mean individuals aren’t able to negotiate on a case-by-case basis. There is still a war for talent and institutions are willing to fight to secure the best candidates.
Let’s take a look at the latest figures representing the state of salaries in the UK’s investment banking sector, how they compare to Europe and the rest of the world, and the trends that look set to shape remuneration strategies in the second half of 2024.
UK bonuses could do better
Interestingly, while efinancial careers reports the below UK bonuses as being the highest outside of the US, Selby Jennings’ survey tells a different story.
Below, bonuses trended at 50%-65% of fixed salary (10% lower than overall European expectations reported by Selby Jennings) and nearly 110% for Managing Directors.
Whether bonuses are higher or lower than expectations seems very much to depend on who you ask.
UK banking pay and bonus changes
| 2023 Average Salary (£) | 2023 Average Bonus (£) | 2023 Average Bonus as % of base | 2022 Average Bonus (£) | |
|---|---|---|---|---|
| Analyst | 70,149 | 44,630 | 64% | 45,937 |
| Associate | 93,727 | 48,876 | 52% | 47,303 |
| Vice President | 125,095 | 62,743 | 50% | 58,671 |
| Director | 178,107 | 115,444 | 65% | 114,269 |
| Managing Director | 353,163 | 386,111 | 109% | 359,019 |
Europe banking pay and bonus levels, 2024
| Title | Base Salary | Base Salary |
|---|---|---|
| Investment Banking Analyst | £55k – £85k | 30 – 90% |
| Investment Banking Associate | £85k – £135k | 40 – 100% |
| Investment Banking Vice President | £140k – £170k | 40 – 100% |
| Investment Banking Director | £185k – £235k | Performance & Origination 70 – 200% |
| Investment Banking Managing Director | £200k – £275k | 20 – 30%+ of Revenue Generation |
Investment banking salaries remain flat
After strong growth in 2022, salaries in investment banking have reportedly hit a more stagnant patch. Research from Morgan McKinley suggests that 70% of hiring managers in banking and financial services feel their salary offers have remained flat.
A little over a fifth (22%) also stated that they had no budget to hire new talent in 2024. This has seen a rise in professionals considering accepting contract roles which tend to offer better pay and more flexibility.
Here are some selected data points from the research – check out the full research for more information.
Salaries at investment banking and brokerage houses (converted from USD in July 2024 at current exchange rates)
| Job Title | 0 – 3 Years | 3 – 5 Years | 5+ Years |
|---|---|---|---|
| Asset Servicing Manager | £50,000 – £55,000 | £55,000 – £60,000 | £60,000 – £85,000 |
| Asset Servicing Analyst | £40,000 – £45,000 | £45,000 – £50,000 | £50,000 – £55,000 |
| Cash Management Manager | £50,000 – £55,000 | £55,000 – £65,000 | £65,000 – £75,000 |
| Cash Management Analyst | £40,000 – £43,000 | £43,000 – £48,000 | £48,000 – £53,000 |
| Product Development Manager | £50,000 – £60,000 | £60,000 – £75,000 | £75,000 – £90,000 |
| Reconciliations Manager | £50,000 – £60,000 | £60,000 – £65,000 | £65,000 – £70,000 |
| Reconciliations Analyst | £32,000 – £35,000 | £35,000 – £40,000 | £40,000 – £50,000 |
| Relationship Manager | £50,000 – £55,000 | £55,000 – £70,000 | £70,000 – £85,000 |
| Sales Support Analyst | £35,000 – £40,000 | £40,000 – £50,000 | £50,000 – £60,000 |
Pay is important but non-financial benefits are increasingly a consideration
Most in banking would agree they are well compensated compared to society as a whole, however within the industry the discrepancies in pay levels do rankle. According to Robert Hall’s 2024 Salary Guide, the lack of competitive pay when comparing like-for-like roles across companies is employees’ top concern, while poor work/life balance only ranks fourth.
However in the efinancial careers research, one London-based Vice President admitted that he was well paid, but also that working fewer hours was more attractive than gaining more pay. The Morgan McKinley research supports this, with flexible working being a number one priority for employees, followed by their bonus.
While some institutions are seeing a slowdown or even hiring freeze, it’s not stopping others from poaching away talent. Offering career support and meaningful work are as important as remuneration to stop employees jumping ship.
Mixed fortunes for bonuses
There looks set to be more scope for investment banks to offer better financial incentives in the future after legislation change. When the UK Government lifted its cap on bankers’ bonuses in 2023, leading investment firms JPMorgan and Goldman Sachs both announced in H1 2024 that they would remove their caps on London-based bonuses.
This means the companies’ top performers now have the potential to earn bonuses up to 10 times their base salary, compared to two times their fixed pay previously. However, Goldman also announced that fixed pay rates would have to drop to accommodate the changing remuneration structure.
Elsewhere, the news is less positive for lower-performing employees. Barclays announced in February of this year that it planned to cut bonuses to zero for a number of investment bankers, following a slowdown in dealmaking.
While the overall bonus pool is said to be smaller as a result, there was a suggestion that high-performing bankers could still see bonus increases of as much as 10%.
Barclays does look set, however, to join a number of UK banks in lifting bonus caps now or in the near future, including Lloyds, NatWest, HSBC and Standard Chartered.
The move to increasing bonuses and overall take home pay is seen as a necessary salvo in the ‘war for talent’, with London-based firms hoping to offer competitive packages on a par with New York-based counterparts.
According to efinancial careers, the biggest bonus increase was for analysts in Continental Europe. The authors attribute this directly to Brexit, which encouraged US banks to base staff in areas such as Paris or Milan instead of London and increase their remuneration accordingly.
The future: Balance and certainty
With the possibility that investment banking may return to the era of several-multiplier bonuses, it looks like bankers at all levels could see bumper pay packets in the future. However, with the suggestion that this may impact currently higher levels of fixed pay, some may consider the quid pro quo of less financial certainty difficult to swallow.
By understanding the financial and competitive pressures faced by investment banking institutions, employees have the power to negotiate remuneration packages that suit their circumstances now, and in the future.
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In the ever-evolving landscape of venture capital (VC), it is crucial to understand the current trends and dynamics of capital allocations.
Q1 of 2023 saw a general improvement by 37% over Q4 of 2022 in terms of VC investment, rising to $44.1 billion compared to $32.3 billion for Q4 2022. However, Q1 of 2023 has also confirmed:
- The high volatility of the market
- The weaker conditions of the economic environment (until March 2023 there were three major bank failures)
- The existence of macroeconomic patterns following unpredictable paths influenced by global geopolitical changes, like the war in Ukraine.
In the light of this, it is interesting to ask what are the recent shifts in VC investments happening, who are the key players and which factors are influencing their decision-making?
James Heath, Investment Principle at dara5, analyzes the VC scenario, focusing specifically on who, at the moment, has opted for allocating capital to VC and also who has not.
The VC scenario
Drawing upon a comprehensive analysis of over 10,000 limited partner (LP) commitments to VC in Europe and the U.S. from PitchBook Data, this is the current VC scenario.
Decreased commitments in 2023
2023 has witnessed a significant decline in VC commitments, with nearly 70% fewer investments compared to the average of the previous decade. This sharp reduction in allocations has raised concerns and prompted a closer examination of the factors influencing LPs’ decision-making processes.
Pension funds and endowments
Notably, pension funds and endowments, traditionally significant contributors to VC funding, have been allocating less capital in recent times. This trend may be attributed to two key factors:
- First. These institutional investors may have over-allocated their funds in 2021, prompting a more cautious approach in subsequent years
- Second. Underperformance in the public markets has adversely impacted their risk appetite and overall investment strategies.
Rise in family offices and corporations
Conversely, family offices (FOs) and corporations have emerged as increasingly prominent participants in the VC ecosystem. FOs and corporations with sufficient liquidity are capitalizing on the opportunities presented by exceptional vintage years for investments. It is important to note that FOs tend to exhibit a binary approach, either actively investing or refraining from VC allocations altogether.
Fund of funds
Special attention must be paid to the role of fund of funds (FoFs) in the current landscape. FoFs that possess deployable capital are proving to be excellent allocators of funds. However, caution is advised when evaluating FoFs, as some may obscure their inability to deploy capital effectively while simultaneously raising new funds. Thorough due diligence is imperative to ensure a productive partnership.
Acknowledging successful fund closures
In light of the prevailing market conditions, it is essential to recognize the accomplishments of those currently achieving successful fund closures. Despite the wider market activity and reduced commitments, reaching closure on a fund is a noteworthy achievement that merits commendation.
Looking ahead
The VC scenario for 2023 is far from being written in stone. There are at play many factors that will contribute to its definition, such as:
- High inflation
In most economies, inflation will end the year above target. According to the Department of Economic and Social Affairs of the United Nations, the global inflation is expected to decline from 7.5% in 2022 to 5.2% in 2023.
- Central banks
Will central banks abandon their tightening cycles as an answer to the financial stability risk increase or will they keep policy tight to lean against inflationary pressures?
- Sustainability and ESG
In Q3 2023, trends reveal that VCs will be increasingly focused on sustainability, renewable energies, and ethical growth.
- Recession risk
According to the IMF, the forecast global growth is expected to slow to 3.2% in 2022 and 2.7% in 2023 from 6.0% in 2021. This represents the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the COVID-19 pandemic.
Given all that, it is very likely that VC will maintain a prudent and more selective attitude at least in the immediate future and it is not improbable that the VC investment in general will drop off from the levels seen in 2021 and 2022. This will clearly have a profound impact, for example, on the startups scenario and also on the timing of new deals closing, making it longer.
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