The harbingers of doom gather as the credit-crunch brings into focus the rising/falling fortunes of lawyers and law firms. There does seem to be a spate of articles appearing contrasting the fabulous earnings of some lawyers, yet hinting at dark times to come. Perhaps, as the season changes from summer to the early suggestion of autumn, the pundits, the journalists and commentators are turning their attention away from sightings of great white sharks off the coast of Britain, away from the Olympics and David Cameron’s interest in Gavin and Stacey, to more serious matters.
By way of illustration… in The Times today there are two articles. The first has the headline “Lawyers make billions but the good times are ending” by Alex Spence and, the second, also written by Alex Spence, ” Law firms feel pinch as companies slash legal spending”
We learn from the first Alex Spence article that: “The top 100 commercial law firms earned combined revenues of £13.96 billion in the past financial year, according to a report published today, an increase of 14 per cent on the previous year. Collectively they made £4.35 billion in profits, an average of £473,000 for each equity partner”
And then…. Spence tells us that “According to Legal Business magazine, the highest paid partners at Slaughter and May, one of the City’s oldest and most prestigious firms, earned £2.4 million each last year”
There is a bit of comparative mumbo jumbo with other magic circle firms… but Slaughter & May enjoys the focus with Spence noting that S&M is ‘notoriously reticent about its earnings..fiercely protective about reputation and heritage’ – a rather interesting footnote about the fact that S&M partners lunch together ‘every day’ in the partner’s dining room and then…. a bit to highlight the contrast in fortunes between the large and small… a note that equity partners at leading personal injury specialists Thompsons are only trousering £83,000. I do seem to recall reading in one of the tabloids, it may have been The Sun, that the average wage in credit-crunched Britain is £23,000. The Spence article notes that law firms take longer to feel the impact of economic downturn…. ‘but the impact was starting to be felt’.
Spence ends with the portent of doom “Law firms are beginning to look at one of their costliest overheads — their staff — and ask questions.”
Alex Spence then goes on to excite us by writing a second article bearing the same date of publication in which he states “Law firms are feeling the pinch as Britain’s top companies, under pressure from the economic downturn, slash their spending on outside legal advice” Spence goes on to say that companies are finding it cheaper to hire their own in-house lawyers rather than give work to external law firms.
It seems that in-house lawyers, according to The Times, “earn less than their counterparts in private practice, with a junior lawyer likely to earn between £65,000 and £120,000 a year plus benefits and bonus.”
Spence notes that companies have been finding it difficult to hire lawyers. This is hardly surprising given the yawning chasm in the earnings of in-house lawyers compared to those in private practice… but… this may well change as law firms start asking questions and firing expensive staff overhead.
We shall see if these portents of doom are realised. It may well be time for some to have a Damascus moment and talk of work-life balance, to talk of opportunity to practice law at the sharp end of corporate enterprise, rather than remotely through the offices of a law factory, to talk of a long held wish, after building up expertise in a top law firm, to use their skills more directly for the good of Great Britain PLC…. that there is a wider agenda for the modern lawyer of today etc etc etc. It may well be that these thoughts are music to the ears of company HR departments and the managing partners of law firms alike. Time will tell.
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