Life's tough at the top
Legal jobs are being lost as the British economy suffers its latest bout of jitters. But this time the axe is falling at partner level, says Grania Langdon-Down
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"There is too much law for sale – the world doesn't want to buy that much law, but there are all those lawyers out there pushing it, and something has to give." So warns the managing partner of one law firm as the redundancies mount within the legal profession.
Leslie Perrin is the managing partner of Osborne Clarke, a law firm specialising in mid-value international business, with 550 lawyers in six offices in the UK, Germany and US. He adds: "There is a whole generation of lawyers who have qualified in the last eight or nine years, who think that the only way is up. But there are no signs that the market is picking up, and I wouldn't be surprised if there are many more redundancies among law firms."
High-achieving solicitors, used to nearly a decade of rising profits, bonuses and half-yearly pay reviews, are among those facing ruthless culling by law firms who see partner redundancies as a quick and effective way of reducing costs and boosting profits. According to The Lawyer magazine's Legal 100 survey, the top 100 law firms may have grown by 10 per cent over the last year to a staggering £8.45bn, but that has not translated into increased profitability – although average profits per partner across those firms still top £300,000.
Sarah King, director of the EJ Legal recruitment agency, is seeing the fall-out from some of the culls. She says: "It is those who are being paid the most who are being chopped – partners in their early fifties who were brought in specifically because of their gravitas and reputation, as well as dynamic high- flyers in their early forties. There is a lot of anger about how firms are doing this, and a lot of fear about future jobs among people who have never faced this before."
One high-flying partner described being made redundant as a "rite of passage" that shouldn't be taken too personally. "But that depends on how it is done. I only found out that I was being targeted when people stopped speaking to me in the corridors, and my name wasn't on a new strategy chart. The one thing I asked for was confidentiality – to leave once I had found another job, which I did within a few months. The firm agreed but then leaked the information. The ineptitude of law firms in dealing with personnel issues is staggering.
"I think that the redundancies you see in the papers are only a fraction of those going on because firms are trying to 'manage' people out to avoid bad publicity."
Catrin Griffiths, the editor of The Lawyer magazine, also believes that a lot more lawyers are going to be asked to spend more time with their families. "During the last recession, many firms stopped taking in trainees, which proved a real mistake when the boom came and they had to pay recruitment agencies huge amounts to get the lawyers they needed.
"This time, partners are going to be more vulnerable, and firms will be taking a really hard look at their performance, although good ones will always be in demand."
Osborne Clarke has recently been through the painful process of making redundant four London corporate partners, four associates, and a handful of support staff in a bid to make the firm – which has seen a 20 per cent drop in partner profits, despite revenues rising 17 per cent to £58.5m – more profitable.
Perrin says that they probably delayed taking action for too long. "Chucking people out does not come easy to us. But, if you look at the dynamics of a law firm, 70 per cent of the cash flow goes on people – 40 per cent to staff, 30 per cent to partners – and only 30 per cent on overheads, which are mostly fixed. Partners are more expensive than trainees, to put it mildly, so for some firms it makes better economic sense to get rid of partners than anyone else."
Jane Swann, chair of the Young Solicitors Group, which represents nearly 50,000 solicitors who are under 36, or less than five years qualified, is also worried that law firms are covertly removing staff. "According to Law Society figures, 17 per cent of young solicitors are unemployed. We couldn't believe how high the figure was, but the figures don't tell us who they are or why they are unemployed. What we do know from our helpline is that some firms are terminating employment of staff for capability or conduct reasons to avoid having to pay a redundancy package."
Verity Chase, chair of the Trainee Solicitors Group, says that so far, trainees haven't been as badly affected as newly qualified solicitors, some of whom have not received pay rises, and who are under pressure to start billing quickly to justify their jobs. "Firms appear to be honouring their commitments to take on trainees, but they may well be more cautious about how many they take on in the next recruitment round."
Uncertainty over the economy is also having an effect on high- street firms and sole practitioners, particularly when it comes to overheads such as insurance premiums. However, Sue Carter, chair of the Sole Practitioners Group, says: "We are in a good position to react quickly to changing market conditions, while key areas such as conveyancing remain buoyant. It is the Lord Chancellor's proposals to open up legal markets to new providers that could force firms in rural and depressed urban areas to drop less profitable work or close."