The streets of London are paved with gold, or so the saying goes; and this year MBA graduates from across Europe are hoping to find their fortunes in the city.

The City of London is drawing in the brightest and best of this year’s graduating classes. The starting salaries for London Business School graduates going into finance are £58,000 – with sign-on bonuses of up to £20,000 on top of that and annual bonuses depending on a firm’s performance.

It is a similar deal for graduates from Iese Business School in Barcelona. Salaries for those going into investment banking average around €100,000 (£69,000). According to Alex Herrera, director of career services at Iese: “For us, London is giving the highest salaries.”

At Insead, near Paris, “it has been an incredible year for recruitment, particularly in finance, which has increased by 10 per cent, driven by London,” says Claire LeCoq, director for MBA career services.

Across the European investment banking industry, MBA recruitment is up significantly, says Alison Trauttmansdorff, head of graduate recruitment for Europe at Goldman Sachs. “MBA hiring is up on average in the industry by 30-50 per cent in comparison with last year.” Although Goldman Sachs recruits MBAs for London, Zurich and Frankfurt, the vast majority are for the London office, says Ms Trauttmansdorff.

Thiri Mon is one of hundreds of graduates who have been attracted to the City. Originally from Myanmar (formerly Burma), Ms Mon graduated from LBS this year. She is now considering a job offer from Morgan Stanley to work in fixed income securitisation. She was offered the job following her summer internship with the firm, which she and many of her fellow LBS students viewed with trepidation. “When we were going into the summer internship – 60 or 65 of us went into the City – there was a lot of anticipation. More than half of us had never worked in the City before,” she says. “But I found it so energetic. Post-MBA is one of the few chances you get to change careers. I want to be challenged.”

Although Ms Mon has not approached any other City firms since her internship, she says several of those she considered for an internship position last summer have approached her again this summer with a view to hiring her.

It is not just European graduates that are feeling the lure of London’s bright lights. Columbia Business School in New York reports London is also popular with its students – it is the second largest city in terms of alumni for the school.

Like many MBA career services directors in the US, Columbia’s Regina Resnick reports that while the European market is being driven by an upsurge in investment banking recruitment, it is the return of management consultants that is shaping the scene in the US. A recent consulting forum at the school was attended by 22 firms – from the likes of McKinsey to the boutiques and niche players, she says.

At the Fuqua school at Duke University, in Durham, North Carolina, it is a similar story, says Sheryle Dirks, assistant dean for the daytime programme and director of the career management centre. “Much is driven by the resurgence in consultancy,” she says. The median salary for those graduating from Duke and moving into consulting is $110,000 (£60,500), but some alumni are earning $135,000, she says.

At Bain & Company, David Sanderson, head of global recruiting, says Bain increased its recruitment of MBAs by 20 per cent last year and expects to do the same again this year. This means that the management consultancy is recruiting more MBAs these days than in the recruiting heyday of 1999-2000. “These are record times; these are record numbers,” says Mr Sanderson.

Overall, the news is loud and clear. The demand for MBAs is back with a vengeance. “It is undeniable that there is more competition for the talent coming out of business school,” says Mr Sanderson.

Students from the top schools once again have the luxury of turning down a job. “Students are feeling a little more confident and walking away from jobs that are not a fit,” says Diane Morgan, head of careers at LBS.

For most of the top US schools, average starting salaries are nudging the $100,000 mark or have broken through the $100,000 threshold for the first time. At the MIT Sloan School of Management, in Cambridge, Massachusetts, for example, graduates received an average salary this year of $103,000 and 92 per cent of students had a job offer on graduation. At Duke, the average salary has gone up $10,000 from two years ago.

In Europe there have been similar increases. The average salary for those graduating this year from London Business School is £60,000, with top average salaries for those who go into consulting of £65,000.

Even better news for new graduates is the greater range of jobs on offer. While the finance sector and management consulting have re-established themselves as the dominant recruiters for MBAs, there is a growing interest from other industry sectors. “The most notable theme is the segmentation of the market,” says Ms Dirks.

It is a segmentation that is both functional and geographical. At the Haas school at Berkeley in San Francisco, technology companies – the likes of Google, Yahoo, Microsoft and Ebay – have now entered the fray in an attempt to recruit MBAs. “They have learnt they have to pay six-figure sums,” says Abby Scott, executive director for MBA career services at Haas.

Google, which MBAs voted as one of their favourite recruiters earlier this year*, has been recruiting across the US. “Google visited campus, and students met with executives,” reports Ms Resnick at Columbia. “They have raised their profile.”

The traditional focus on US and European companies is also changing. Insead, which has campuses in France and Singapore, says 25 per cent of its students now find their first job in the Asia-Pacific region. Recruitment by Indian companies is particularly strong. “Indian companies are looking to recruit outside Indian business schools, where they have recruited in the past,” says Ms LeCoq. “They are looking to get into European markets. So they hire for India to start with and then move [the MBAs] into Europe afterwards.”

However, for many students the salaries paid by Indian companies still do not match those paid by European or US companies, says Dora Bose, who is leaving Insead in Fontainebleau this summer to work for Standard Chartered Bank in Mumbai. When she was looking for a job, she says, her priority was to work in the banking sector in Europe or Asia and to get a job with international exposure. Standard Chartered offered her a job in consumer banking, which she was particularly interested in, and a competitive package to boot.

While the salaries that companies must pay to attract MBAs are rocketing, there is some good news for business. During the dotcom boom, MBAs often chased unrealistic dreams. These days, says Mr Sanderson, “students want to learn the fundamentals, how to create value in business ...the investment must surely pay off.”

*The Universum Survey: American MBA Edition, www. universumusa.com/mba.html