One of the pearls of wisdom I’ve gleaned from five years as a journalist covering the legal market is that no one – not even the senior partners of international law firms – really understands what makes the economy go up or down.
They pretend to do so in public, of course, pontificating to conference audiences on likely economic scenarios “going forward”, and putting their names to five year action plans based on carefully-calculated projections. But it’s all for show.
When you get these people speaking off-the-record after a few beers, the scary reality of their cluelessness starts to emerge. If there’s a common belief among them, it’s that, at the end of the day, the economy is all about confidence.
This is why, with my faith in official pronouncements in tatters, that I find the relatively upbeat tone of the news since the new year began to be cause for at least some optimism. As recently as a month ago, there was a consensus that the Eurozone crisis could bring about some kind of World War Three scenario. But, in a woolly, hard-to-explain kind of way, 2012 has seen a new optimism that things are resolvable. At the root of this seems to be a vague sense that a recovering US may yet be capable of bringing about the necessary global upsurge to save the world, in a way that was somehow impossible before. I guess, after re-charging our batteries over Christmas, we just feel more confident.
This mood has extended to the legal profession, where there has also been some positive news – especially for law students and junior lawyers. The London office of US firm Kirkland & Ellis last week announced that it is upping its newly qualified solicitor salary to £97,000, following a couple of high profile pupillage award raises at Wilberforce and Stone Chambers (to a whopping £60,000, half of which is tax free, to graduates straight out of bar school).
Meanwhile, there have been some encouraging retention rate figures released by law firms, with research by the Chambers Student Guide showing that 80.5% of 2,253 newly-qualified (NQ) lawyers were retained after qualification – up over 6% from 2009.
However, just as there is concern that the fundamentals behind a global recovery are pretty weak, the foundations on which these encouraging pieces of legal news are built look distinctly shaky.
First, Kirkland & Ellis raising its NQ salaries is not about law firms doing well, but rather a symptom of a wider push by US firms to grab market share in London because UK firms are so weak right now. One of the reasons US firms, which aren’t in great shape themselves, can afford to do this, is because the pound continues weak against the dollar. Note the absence of any junior lawyer pay rises at UK firms.
The pupillage award rises, on the other hand, have happened at least in part because commercial barristers are doing well – gorging on the large amounts of litigation the 08-09 financial crisis and recession is still throwing up. But this is a relatively tiny part of the law, with most of the large corporate law firms far more geared to transactional work than litigation, and the rest of the Bar struggling with cuts to legal aid.
As for the retention rate figures, once you get past the headlines, the Chambers Student Guide report notes that its numbers are skewed by law firms’ widespread deferral of trainee start dates in 2009, making the qualifying class of 2011 by far the smallest in recent years – down by more than 400 from 2010. In other words, retention may be up, but there are less trainees to retain.
Still, maybe this flurry of good news, as brittle as what underlies it may be, will generate enough confidence to bring about further positive events. Or perhaps the real recovery will only get underway in 2013 when a butterfly flaps its wing in a rain forest somewhere.
Alex Aldridge is the editor of Legal Cheek