Investment Banking in London: Equally Attractive Alternative to New York?

In addition to Prime Ministers that serve for only 44 days and questionable weather/food, the United Kingdom is also known as a global hub for investment banking.

Many would argue that investment banking in London is second only to New York in terms of compensation, exit opportunities, deal flow, and “prestige.”

Banks in London advise not just U.K.-based companies but also firms across Europe and the entire EMEA (Europe, the Middle East, and Africa) region.

It might be the best place to gain diverse deal experience based on region, industry, and transaction type.

On the other hand, some have raised questions about the future of finance in the U.K. following Brexit, a much less valuable British Pound (GBP), the ongoing energy/inflation crisis, and more.

We’ll address these points here, but let’s start with a quick industry overview:

Investment Banking in London: Top Banks and Industries

Broadly speaking, the top 3 banks in the U.S. – Goldman Sachs, Morgan Stanley, and JP Morgan – are also the top 3 banks in London.

You’ll see them at the tops of league tables by M&A advisory volume in most years, and they tend to work on the highest-profile transactions.

After that are the top two elite boutiques in the U.K. – Rothschild and Lazard – and the other bulge bracket banks (BofA, Citi, CS (??), DB (??), Barclays, and UBS).

Various European “In-Between-a-Banks,” such as BNP Paribas and Société Générale, also tend to place well – with a much stronger presence than in North America.

The strongest middle-market bank – Jefferies – is usually in the top ~15 by advisory volume in the EMEA region, and other elite boutiques, such as Centerview and PJT Partners, round out the top ~20.

Below them are the Big 4 corporate finance teams and smaller U.K. or Europe-focused banks such as Numis and Jamieson.

If you drill down to other European countries, you’ll see other country- or region-focused banks show up in these lists (e.g., Mediobanca in Italy and France).

The main differences vs. the U.S. “rankings” are:

1. Elite Boutiques – Rothschild is far stronger and is viewed as a real elite boutique; Lazard is still strong, and the other U.S.-based independents are weaker.
2. In-Between-a-Banks – The European commercial banks mentioned above (BNP, SG, etc.) are stronger in EMEA than in North America.

In terms of industry groups and product groups, investment banking in London is highly diversified, so no single industry or deal type dominates.

The top banks are strong in the expected areas: TMT, M&A, consumer/retail, industrials, etc.

But as you move down the list, a bank’s specific strengths start to matter more.

For example, an offer in Restructuring at PJT Partners in London – the top team there – is very different from an offer in an industry group.

A Restructuring offer at PJT arguably beats a GS / MS / JPM offer if you want to focus on distressed deals, but an offer in Industry Group X does not.

Investment Banking in London: Recruiting and Interviews

The IB recruiting process in the U.K. is quite different from the one in the U.S., Canada, and most other regions – even other European countries.

The main differences are:

1. Spring Weeks – These 1-week programs take place early in university and allow you to shadow bankers and, if you do well, get fast-tracked for a summer internship the next year. You don’t “need” one to win an internship, but it certainly helps. This article on spring weeks needs a revision/update, but it’s a decent introduction.
2. Online Tests and Competency Questions – When you submit your application, you’ll have to take numerical, verbal, and logic tests and answer “competency questions,” which are written versions of the standard fit/behavioral questions. These exist to weed out candidates, and you could be rejected if you make even a small spelling or grammatical mistake. To succeed, practice as much as possible with sample tests.
3. Timing – Applications for summer internships tend to open in August / September of the preceding year, so the timing is slightly less crazy than in the U.S., where banks might start their processes well over a year in advance. You must apply IMMEDIATELY when applications open because internships are first-come, first-serve.
4. Assessment Centers (ACs) – Assuming that you apply online, pass the screening, and do well in your first-round phone interview or HireVue, the process ends with an “assessment center” (AC) rather than a Superday. At the AC, you’ll go through multiple interviews, you’ll complete a group exercise or case study (e.g., Should Client X acquire Company A or B?), and there may be other exercises such as “e-trays,” “in-trays,” or report writing. They might even give you the same numerical and verbal tests from the online application round to ensure you didn’t cheat!
5. Candidate Qualities – Bankers still want students from top universities with good grades (2:1 or above) and relevant experience, such as internships at local PE/VC firms. But extracurricular activities are more important, and interviewers often focus more on “team fit” and less on technical skills. Also, knowing other European languages is important because of all the cross-border deals. It’s not “required,” but business-level proficiency in French, German, Italian, Spanish, etc., will give you a big advantage.
6. Off-Cycle Internships – Off-cycle IB internships outside the normal summer window are much more common in the EMEA region, and if you graduate without a full-time offer, you can use them to network and work your way into an offer eventually.
7. MBA-Level Recruiting – It still exists in London, but it’s far less developed than in the U.S. Analyst-to-Associate (A2A) promotions are more common, and even lateral hiring from related fields may be slightly easier.

With all that said, IB recruiting still isn’t that different because you still need to start early and prepare for similar interview questions (Your story, why our bank, strengths/weaknesses, basic technical concepts, etc.).

The main difference is that the process is broader and shallower, so your preparation should match that.

For example, don’t spend much time learning advanced technical material; make sure you know the basics well and spend more time practicing for the online tests and the group exercises they might give you at the AC.

Does Networking “Not Work” in London?

One final note about recruiting: many people claim that “networking doesn’t work in London,” so contacting bankers and setting up informational interviews is pointless.

They argue that the entire process is too impersonal and random for networking to make a huge difference and that it’s better to attend structured networking events when banks host them.

My quick thoughts are:

1. Yes, traditional networking is probably less effective in London, but you shouldn’t ignore it completely (it’s still worth contacting a few bankers at each firm).
2. And it is still helpful if you’re at a non-target university, you’re aiming for off-cycle roles, or you’re focused on smaller firms, where “who else you know” is a key question.

Don’t ignore networking, but don’t feel pressured to go “all-in,” especially if everything else in your profile looks good.

Investment Banking Target Schools in the U.K. and Europe

The “target school” list in London includes a mix of U.K. universities and top schools in other European countries.

Within the U.K., most would say that the target universities include Oxford, Cambridge, LSE, UCL, Warwick, and Imperial.

There are also various “semi-targets” such as Durham, Bristol, Nottingham, St. Andrews, etc.

Target schools in France include HEC, ESSEC, ESCP, and the top few engineering schools; in Spain, names like ICADE, ESADE, and IE are on the list; and in Italy, Bocconi is the main target.

In Ireland, there are UCD and Trinity; in Germany/Switzerland, it’s St. Gallen, WHU, and Mannheim; in the Nordics and Benelux, the names include CBS, SSE, NTNU, RSM/Erasmus, and Solvay.

This is not an exhaustive list. I included a few top names by country, but you could argue for others and include “semi-targets” as well.

As with the U.S., you don’t need to attend one of these specific universities to get into investment banking in London.

But your chances are higher, and you don’t need to stand out quite as much in all other areas with one of these brand names on your CV.

Investment Banking in London: Salaries and Bonuses

Salaries and bonuses are significantly lower in London than in the U.S.

Expect a ~30% discount to pre-tax compensation in New York, and sometimes more like 40%+ depending on your level and the current GBP/USD exchange rate.

You can get the full numbers in the Arkesden compensation reports, but the rough total compensation ranges at large banks as of 2022 are as follows:

• Analysts: £100K – £150K total compensation
• Associates: £200K – £300K total compensation
• VPs: £350K – £450K total compensation

Salaries and bonuses tend to be lower because of:

1. The Lack of GBP/USD Exchange Rate Adjustments – The large banks set their compensation levels a long time ago based on much higher exchange rates (1.5x – 1.6x or even near 2.0x back in 2008) and never bothered to adjust them even after the GBP kept falling.
2. Lower Deal Volume and Fees – Google any league table and compare the total deal volume in North America to EMEA and see for yourself.
3. The EU Bonus Cap – After the 2008 financial crisis, EU rules limited year-end bonuses to 2x base salary. This cap might be going away now that the U.K. has left the EU, but until it does, it’s still a limiting factor for senior bankers.

People often counter these points by saying, “But housing is cheaper in London! Also, the quality of life is better, and items X/Y/Z are cheaper/better.”

I agree that rents are cheaper in London, as are other items, but the effective tax rate is also higher, so you may not save more in practice.

We can debate the “quality of life” and the cost of living all day, but the bottom line is that you will earn less in London.

IB Lifestyle and Hours in London

But that reduced compensation comes with a benefit: you also work shorter hours and get more free time and weeks of vacation.

You might see a ~5-10% reduction in work hours at the junior levels, which could mean ~1 hour of extra free time per day.

But there’s also a wide variance between banks, with the U.S. bulge brackets requiring longer hours and the elite boutiques and European banks caring a bit less.

And although it’s difficult to quantify, many bankers would say that the overall culture in London is more relaxed, so it’s easier to maintain a semblance of a personal life.

Investment Banking in London: Exit Opportunities

If you decide you need to make more money, there are plenty of exit opportunities in London, and they’re quite diversified.

The most common ones for bankers are private equity and hedge funds, but plenty go into corporate development, venture capital, growth equity, private credit, and so on.

We’ve covered the London private equity recruiting process in a previous article, but to summarize: there is no “on-cycle” and “off-cycle” split.

Instead, the process starts when PE firms need to hire people, and you have more time to gain deal experience over your first few years in IB.

Past the first few rounds, interviews are less about rapid-fire technical questions and 60-minute LBO modeling tests and more about open-ended case studies and extended interviews.

All the U.S.-based mega-funds have a presence in London, as do the larger middle-market funds.

The biggest difference is that the European upper-middle-market funds, such as Ardian, BC Partners, Bridgepoint, Cinven, CVC, EQT, PAI, and Permira, have a stronger presence in London.

(And yes, I realize some of these could be considered mega-funds.)

One issue with PE exits is that you may be limited by your language skills.

Many of these firms want to hire candidates who know other European languages, so you may not be competitive if you know only English or non-European languages.

If that’s the case, you might have better luck recruiting at hedge funds because language skills are sometimes less important.

(But they still help if you’re recruiting for something like distressed debt funds that trade Spanish and Italian bonds.)

Overall, London is probably the best city for traditional IB exit opportunities after New York.

Other U.S. cities might come close, but they have much less hedge fund activity and are strong mostly in specific verticals such as tech (SF) or energy (Houston).

Investment Banking in London in a Post-Brexit World

Following the U.K.’s vote to leave the European Union in 2016, many pundits assumed that finance jobs would instantly shift away from London and into EU cities such as Paris, Frankfurt, and Milan.

And banks have been adding staff to their offices in these cities…

…but the predictions of 100,000+ financial jobs leaving London (out of 500,000+ total) haven’t held up; the actual number is more like ~7,000.

One issue is that the other cities can’t compare to London on other dimensions, so senior bankers don’t necessarily want to relocate.

Another problem is that there’s no clear, single top alternative to London, so the jobs have become more widely distributed rather than concentrated in one city.

In the long term, more jobs and deal activity will likely move to cities still within the EU, but there will still be a sizable sector in London.

Could a city like Paris or Frankfurt eventually have more investment bankers than London?

It’s possible, but I would not bet on this happening anytime soon because these things take a very long time to change (think: decades, not years).

Investment Banking in London: Final Thoughts

So, is London the best place to be an investment banker after New York?

It depends on your goals and other options.

I would probably rank other U.S. cities, such as Chicago and SF, above London based on compensation and overall deal flow.

On the other hand, I would put London above places like Canada, other European cities, and Asia/Australia.

You could argue that Hong Kong is better than London due to higher compensation and lower taxes, but HK is no longer a viable option unless you’re a Chinese citizen and you want to deal with all the ridiculous rules and restrictions there.

The main disadvantages of investment banking in London are the reduced compensation and the relative randomness of the recruiting process.

The long-term outlook is also negative due to Brexit, but I don’t think it matters much unless you plan to be a career banker.

The biggest advantages of IB in London are the broad exit opportunities and the diverse experience you can gain (and maybe the modestly better lifestyle/hours).

So, if you cannot work in the U.S. or do not want to, London is the next-best place to start an investment banking career in most cases.

And if banks finally adjust their compensation to the lower GBP exchange rate, London might become #2 globally after NY.