Graduate recruitment in 2007 and outlook for 2008

• Summary
• Introduction
• The 2006-07 graduate recruitment season
• Outlook for 2008
• Footnote
• References

Summary

According to the Association of Graduate Recruiters, graduate vacancies are forecast to see a year-on-year rise of 12.7% in 2007, a significant increase compared with only 5.2% for the previous year, writes Pearl Mok from the Higher Education Careers Services Unit (HECSU). The median starting salary is anticipated to rise by a more modest 2.4%, which corresponds to a median salary of £23,500 - a figure seen as competitive enough amongst many employers.

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Introduction

In the Spring 2007 issue of Graduate Market Trends, we reported what the graduate employment market was like for the 2006 recruitment season and the outlook for 2007 [1]. Much of the information reported was based on a survey of employers conducted for the Association of Graduate Recruiters (AGR) in November 2006 (‘Winter Review’) [2]. This article, based on the latest AGR survey conducted in May and June of 2007 (‘Summer Review’), is a follow-up of the earlier report, and includes a more up-to-date account of the expected recruitment and salary rates for 2007 and outlook for 2008 [3].

Tables 1a and 1b summarise the key salary and vacancy data published in the two AGR surveys (see footnote).

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The 2006-07 graduate recruitment season

Vacancies

The number of graduate vacancies amongst AGR employers for the 2006-07 recruitment season is forecast to see a 12.7% increase over 2005-06. Although this is slightly lower than the forecast of 15.1% reported in the Winter Review, it is more than double the real year-on-year increase of 5.2% reported for 2005-06, and signifies that the graduate recruitment market is going strong. Amongst the 219 employers surveyed, a total of 20,413 graduates are expected to be recruited this year.

No company/business sectors are anticipating a decline in vacancies in 2007, and most are looking forward to a healthy growth. The banking and financial services sector is offering 465 more vacancies in 2007 compared with the previous year – the highest increase in the absolute number of vacancies amongst all sectors, and corresponds to a year-on-year percentage increase of 22.9%. This is followed by accountancy and professional services, where although the percentage increase is just 9.7% they have 416 more vacancies on offer than in 2006.

In terms of types of work, the AGR reported that consulting and financial management are doing ‘exceptionally well’ in 2007, with vacancy increases of 54.8% and 45.5% respectively.

It is important to note that the survey of AGR employers was carried out in May/June 2007, before the turmoil of the financial market in August as a result of the US mortgage losses. Since then, it was predicted that thousands of jobs may be lost in the City of London in months to come [4]. What effects (if any) this will have on graduate recruitment remains to be seen.

In the earlier Winter Review, it was forecast that all regions in the UK would see a rise in graduate vacancies in 2007. In the latest report, however, Wales and the North West are predicting a 5.7% and 1.3% year-on-year drop in vacancies. Graduate recruitment in London and the South East, the two largest graduate employer regions, however, still appears healthy with vacancies expecting to be up by 8.8% and 24.2% respectively in 2007 over 2006.

Salaries

The median graduate starting salary amongst AGR employers for 2007 is forecast to be £23,500, up 2.4% on the 2006 figure of £22,953. In terms of business sectors, law firms are predicting the largest year-on-year increase in median starting salaries, at 15.2%, with the median figure standing at £35,700. In contrast, banking and financial services, despite reporting a buoyant increase in the number of vacancies in 2007, is experiencing a 2.7% year-on-year drop in the median starting salary, although, at £37,000, it is still the highest paying sector.

Two regions, London and East Anglia, have reported a fall in salaries in 2007 over 2006. The study, however, warned that the drop in salaries in London has to be interpreted with caution. Instead of widespread salary reductions in the region, only one London recruiter is, in fact, offering a slightly lower starting salary in 2007 than in 2006, with all other firms offering the same or higher salaries. Although the number of vacancies for higher paid positions in the region has remained stable between 2006 and 2007, there has been an increase in the number of positions with lower salaries, with the net effect being a year-on-year drop in the regional median salary.

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Outlook for 2008

There is little sign of the graduate recruitment market slowing down in 2008, according to the AGR survey, although again, this has to be interpreted in light of the financial market changes in August. Half of the employers (49%) surveyed by the AGR expect graduate recruitment levels to be similar to 2007, just under three in ten (28.9%) expect to recruit slightly more graduates, and one in eight (12.3%) anticipate recruiting many more.

Employers’ predictions on 2008 salary levels are more cautious, however. At the time of the survey, a quarter of the employers (24.9%) have not yet decided on salaries for the next year, but for the rest: two in five (39.8%) are expecting only a cost-of-living rise, another one in five (19.4%) anticipate salaries to increase above this level, and one in six (15.9%) are predicting no change from the 2007 rates.

Several reasons have been identified by AGR employers for the relatively modest increase in recent salary levels:

• Salaries are fine as they are; ‘competitive enough’.
• Salaries have been increasing (too) fast and the slowdown is inevitable. Many employers have raised the issue of consistency with salaries paid to previous years’ graduate recruits and to other employees within the organisation. There is also a concern that graduate salaries could become out of line with the ‘real jobs’ graduates are recruited for.
• Salaries are fine as they are, for what graduates are bringing into the organisation.
• There are plenty of graduates on the market, despite the rise in demand.

A ‘mirror survey’ of 1,633 UK university students approaching the end of their course reveals that students are indeed realistic in view of their limited experience. They are conscious of the ‘lessening exclusivity of a university education’ and ‘certainly agree with employers that the rapidly rising numbers of graduates on the market mean that salaries have no need to increase as rapidly as vacancy levels.’

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Footnote

Please note that salary figures from the AGR are reported by mainly large companies and organisations and the vacancies are aimed specifically at graduates. A substantial number of graduates, however, obtain posts which are not specifically targeted at degree holders. As a result, the average salary figures from the AGR are likely to be higher than the average graduate starting salaries sourced from student surveys such as the Destinations of Leavers from Higher Education (DLHE) survey, as there is a bias towards larger firms and specific graduate jobs.

References

1. ‘Graduate recruitment in 2006 and outlook for 2007’, Graduate Market Trends, Spring 2007.

2. The AGR Graduate Recruitment Survey 2007: Winter Review, produced for the AGR by Hobsons.

3. The AGR Graduate Recruitment Survey 2007: Summer Review, produced for the AGR by Trendence.

4. Market woes ‘to cost City jobs’, Will Smale, BBC News, 22 August 2007.

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