Life as a junior banker in London is not what it was. As we reported last year, the marginal rate of tax for young bankers on £120k with student loans to repay rose to 72% last year when National Insurance increased. That NI increase was reversed by Kwasi Kwarteng in his mini-budget and wasn’t reimposed yesterday, but UK taxes are on an upward trend, and banking juniors are apprehensive.
“If anyone’s going to get squeezed, it’s probably us,” says one London banking associate, speaking on condition of anonymity. “But we’re being squeezed by so many things right now and it’s just another addition.”
Analysts in investment banks are paid their bonuses in the summer and last summer’s payments were a disappointment, particularly at the likes of Morgan Stanley. As pay flat lines and inflation increases, young bankers say they’re not as financially gifted as they used to be.
“It’s the senior people in banks who should pay more tax,” says one Morgan Stanley analyst, speaking on condition of anonymity. “Junior pay has barely increased – we’re earning the same amount now that people earned 10 years ago and it’s hard to save any money in London, even if you’re not spending much.”
Although banks hiked salaries for juniors in 2021 and again earlier this year, at many banks the increases have been eroded by a compensatory reduction in bonuses. Combined with fears of job losses, a sense that banking isn’t as prestigious as it used to be, and the threat of tax increases and declining purchasing power, this is causing angst. “Money isn’t flowing into juniors’ pockets and a lot of people are very unhappy about the situation,” says another analyst.
The remedy, however, isn’t always clear. While Hong Kong, Dubai and Switzerland offer lower taxes, jobs there aren’t always easy to find. “I’m thinking of going to Switzerland,” says the associate. “But if you lose your job in Zurich, you can’t find another one for two years.”
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