An average starting salary of £19,600 awaits students graduating from university this year, following a 4.2% rise on the previous year, research suggests.

Starting salaries could reach an average of £20,300 by next year, the research by the Association of Graduate Recruiters (AGR) predicts.

The war for talent is keeping starting salaries on the upward path

Carl Gilleard, AGR chief executive

The AGR's half-yearly review of graduate salaries and vacancies - based on responses from the UK's leading employers - found starting salaries for 2001/02 ranged from £11,000 to £37,000.

The survey looked at average graduate salaries, stripping out extremes, across various sectors ranging from legal and financial to hotel and catering and manufacturing.

The AGR found graduates entering the legal sector could expect the highest starting salaries of £28,000, followed by those going into banking and finance on £23,500.

But graduates starting a career in accountancy looked likely to start on the lowest average salary of £17,500.

£1,500 handouts

As the battle to recruit the best graduates escalates, a quarter of companies are offering "golden hellos" or some form of joining payment to attract top talent.

Handouts were found to range from £500 to £11,000, averaging £1,500.

But the number of job vacancies was expected to fall by 6.5% during 2001/02, contrasting sharply with the 14.6% increase predicted this time last year.

Graduates going into the IT and software industries face stiffer competition

The AGR suggests this could reflect changes to the economy and market conditions since 11 September 2001.

But not all sectors looked set to cut back, with 32% of employers intending to increase their graduate intake and a further 29.5% expecting it to remain at the same level as last year.

The energy and water industries were poised for the highest growth of 29.2%, while the sharpest fall is forecast in the information technology, software and telecommunications sector at 39%.

Carl Gilleard, AGR chief executive, said: "Although employers continue to be cautious in the current economic climate, it's encouraging that many are planning to maintain or increase their graduate intake over the next year."

"The war for talent is keeping starting salaries on the upward path. But it's important to note that the market is not buoyant in all sectors.

"Some graduates, particularly those in IT, software and telecoms, will face stiffer competition than others to get the job they want."