For generations, aspiring graduates have streamed into London, lured by the promise of higher pay and faster career progression. But does a move to the capital really deliver a financial edge – and for whom? A new report from the Institute for Fiscal Studies digs deep into the links between higher education, geographical mobility and early-career earnings, shedding light on who moves, who stays, and how those choices shape pay packets in the first decade after graduation.Drawing on detailed administrative data, the study challenges some long‑held assumptions about the “London premium” and exposes stark inequalities by background, subject and institution that continue to define the graduate labour market in modern Britain.
Regional pay premiums reshaping graduate career trajectories in London and beyond
For many new graduates, headline salaries in the capital still act as a powerful magnet, yet the calculus is rapidly changing. Regional pay uplifts in cities such as Manchester, Birmingham and Edinburgh are beginning to narrow the once yawning gap with London, especially in sectors like technology, professional services and the creative industries.When these higher starting wages are weighed against sharply lower housing and commuting costs, the effective “take‑home advantage” often lies outside the M25. Recruiters report that graduates are increasingly benchmarking roles not just by the figure on the contract, but by the spending power that figure buys, prompting a quiet redistribution of early‑career talent across the UK’s urban map.
These shifts are already visible in graduate decision‑making, with location now treated as a strategic lever rather than a default. Early‑career professionals are asking where a role will put them on a 5-10 year trajectory: Will a regional hub offer faster progression? Is remote or hybrid work strong enough to make geography less binding? In response, employers are experimenting with more granular pay structures and targeted incentives, such as:
- Regional salary bands for the same role, reflecting local labour demand.
- Mobility bonuses for graduates willing to relocate into growth clusters.
- Hybrid contracts that trade a modest pay discount for greater spatial flexibility.
| City | Typical graduate pay* | Estimated rent share of income |
|---|---|---|
| London | £32,000 | 45% |
| Manchester | £28,000 | 30% |
| Birmingham | £27,000 | 29% |
*Illustrative figures capturing early‑career roles across major sectors.
How university choices influence willingness to relocate and long term earning potential
Where students choose to study often sets the radius of their future job search. Those who enrol in institutions embedded in large, diversified labour markets – notably the capital and other major cities – are exposed early to sectors that reward mobility, from finance to tech and creative industries. In contrast, opting for a local provider can tighten the geographic lens: proximity to family, existing social networks and lower living costs become powerful anchors. This is not simply about postcode snobbery; it is about the density of opportunities within commuting distance and the networks formed during internships, part-time work and campus recruitment drives. Over time, these factors shape whether graduates feel able – or compelled – to move for work, and at what price they trade familiarity for higher pay.
That trade-off shows up starkly in the data. Graduates who study in regions with strong graduate labour markets are more likely to accept relocation as a normal career step, and employers often assume that mobility as a given when setting salaries and promotion tracks. Meanwhile, those tied to weaker local economies may face a “loyalty penalty”: staying close to home can mean slower wage growth, narrower sectoral choice and fewer chances to switch employer without moving house. Key elements influencing this dynamic include:
- Type of institution: research-intensive universities tend to have deeper links with national and global employers.
- Regional wage levels: big-city institutions normalise higher pay but also higher living costs.
- Professional networks: alumni clusters in specific cities lower the social and psychological cost of moving.
- Local attachment: caring responsibilities or cultural ties make relocation less attractive, even when salary gaps are large.
| Study Location | Typical Mobility | Early-Career Pay* |
|---|---|---|
| Capital city university | High (national & international moves) | £30k-£35k |
| Large regional city | Moderate (regional hubs) | £26k-£30k |
| Smaller town / local provider | Low (local area) | £22k-£26k |
*Illustrative ranges for full-time graduates in the first years after leaving university.
The hidden costs of moving to London balancing higher salaries against living expenses
Moving to the capital can feel like an instant upgrade in earning power, but the payslip rarely tells the full story. Graduates lured by headline salaries quickly discover that a larger proportion of their income is absorbed by everyday costs that are simply lower elsewhere. Rent on a room in a shared flat can rival a mortgage payment in other cities, while transport costs mount even for those relying on the bus rather than the Tube. The trade-off is particularly stark in the early years after graduation,when student loan repayments begin and savings buffers are still thin. For many young professionals, the question is not just how much they earn in London, but how much they actually keep once the basics are covered.
The financial reality is shaped by a cluster of often overlooked outgoings that nibble away at disposable income and long-term financial security:
- Housing premiums – higher rents, deposits and fees for much smaller spaces.
- Commuting and travel – season tickets, late-night taxis and higher day-to-day travel costs.
- Everyday essentials – food, utilities and leisure priced above the national average.
- Social and networking pressure – costly after-work culture that doubles as informal career networking.
- Lower savings and wealth-building – slower routes to home ownership and thinner emergency funds.
| Monthly budget item | Regional city | London |
|---|---|---|
| Rent (room in shared flat) | £450 | £900 |
| Transport pass | £60 | £190 |
| Groceries | £140 | £200 |
| Average starter salary | £25,000 | £31,000 |
Policy and personal strategies to improve mobility and earnings for new graduates
Translating the evidence into action requires interventions on both sides of the graduate-state contract. On the policy front, targeted incentives can help level the playing field between London and the rest of the UK, rather than simply funnelling talent into the capital. This might include relocation grants for low-income graduates,better funding for regional graduate programmes and the expansion of hybrid roles that allow workers to live outside the most expensive postcodes. Universities, too, can be more active brokers of possibility, building partnerships with employers across the country and embedding real-time labour market data into careers guidance. Where mobility is constrained by housing costs rather than ambition, reforms that unlock affordable, well-connected rental options-particularly near major employment hubs-could be just as powerful for earnings as any change in the student loans system.
| Levers | Policy Actions | Graduate Actions |
|---|---|---|
| Location choices | Travel and rent subsidies in high-cost cities | Compare net pay after rent, not headline salary |
| Data gaps | Publish regional graduate earnings and vacancy data | Use salary data tools to map sectors, not just cities |
| Networks | Fund regional mentoring and alumni schemes | Build cross-city networks via online events |
At the individual level, new graduates can do more than simply follow the gravitational pull of London. A sharper focus on sectoral mobility-moving into high-productivity industries, wherever they are located-can deliver sizeable wage gains without necessarily crossing the M25. Graduates can increase their bargaining power by cultivating portable skills that travel well across regions, such as data literacy, project management and client-facing experience. Practical steps include:
- Mapping opportunity corridors – Identifying cities where growing sectors overlap with lower housing costs.
- Staged mobility – Starting in a regional hub to build experience, then leveraging that track record for higher-paid roles in (or outside) London.
- Remote-first roles – Targeting employers with national hiring strategies, using flexibility to decouple earnings from local wage levels.
- Strategic upskilling – Using short,targeted courses aligned with sectors that offer strong early-career pay progression.
Final Thoughts
Ultimately, the message from this research is not that London is a bad bet, nor that staying local is always wiser, but that the trade‑offs are far more nuanced than a simple “move to the capital, earn more” narrative suggests. As policymakers grapple with regional inequalities and universities continue to market the life‑changing potential of a degree, the IFS analysis serves as a reminder that geography, background and subject choice still quietly shape who gains most from higher education.
For students weighing up offers and for the institutions advising them, the findings argue for clearer guidance about the real-world implications of moving – or not moving – for study and work. And for government, they underscore the need to ensure that high returns to education are not confined to those willing or able to chase them in London.
The capital may still be calling,but answering that call is no longer an obvious route to prosperity for all. Understanding when it pays to move – and when it doesn’t – will be central to building a fairer, more geographically balanced graduate labour market.
