Four predictions for corporate law this year

What to expect in the City during 2017

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Legal Cheek editor-in-chief Alex Aldridge sniffs the wind to forecast what lies ahead for the commercial branch of the legal profession in 2017.

Training contracts continue to be redistributed — but numbers hold up

Over the last couple of years falls in training contract numbers among some leading City law firms have been made up for by rises in graduate places being offered by US firms in London.

A good example is the way that Clifford Chance’s shedding of 20 TCs (the magic circle firm dropped training contract places from 100 to 80 last year) was mopped up by White & Case’s increase of TCs by the same number, from 30 to 50.

This phenomenon has not been widely documented in the legal press, which too often defaults to the post 2008 narrative of law firm decline. Actually, training contract numbers rose by 9% from 5,001 to 5,457 in the most up-to-date available stats published last year. A fair chunk of that boost has been provided by US law firms expanding en masse in London of late, while there was also a notable increase in in-house training contracts.

Now with the dollar at historic levels against the Brexit pound, expect further US law firm investment on these shores — which will mean more training contracts. The flipside may be commensurate falls in graduate places at UK-headquartered rivals (although Clifford Chance’s better than expected financial results announced this week point in the other direction). But overall training contract numbers look set to remain steady at the very least.

Regional lawyers look cheap

The gap in pay between newly qualified corporate solicitors in the City of London and those outside the capital has never been wider. The global MoneyLaw craze has seen pay among the former group reach nearly £150,000, while the latter typically earn around £40,000.

This is a silly differential for rookies who attended the same universities and law schools, and in many cases came away with similar grades. What it implies is that some clients aren’t getting great value for money.

With the likely boost in regionally-focused infrastructure spending under Theresa May’s government set to put a greater spotlight on places like Leeds, Manchester and Birmingham, lawyers operating outside London may begin to come back into fashion. Certainly, these cities are far more than the low cost legal outsourcing hubs that some have been billing them as in recent years.

Artificial intelligence hype dissipates

AI in law was one of the themes of 2016. And justifiably so, with the landmark case of Pyrrho Investments v MWB Property which saw the use of predictive coding in document review approved by the English courts for the first time. Such techniques will now become much more widespread.

But predictive coding — which sees a human reviewer ‘train’ a computer system to identify and classify relevant documents within large volumes of data — is a long way from robotic lawyers.

It’s easy to hype up the potential of AI to create armies of solicitor automatons, but the reality is that its application to the provision of legal services is complicated and fraught with the potential for costly error. Those who succeed in improving efficiency will be rewarded for it, which is why major law firms are channelling money into tech, but the timescales for development and implementation are too large to sustain some of the hype that has gathered around the sector.

Diversity becomes more sophisticated

The widening of recruitment into the legal profession over the past decade has been a huge success story, capped by the widespread adoption last year by corporate law firms of contextual recruitment — a system which places candidates’ academic grades in context of their schooling and background.

This is a huge step forward and marks a major shift from even five years ago when I wrote a column for the Guardian on such matters and was repeatedly told by law firms how contextual recruitment was unnecessary.

At the same time, as attitudes have changed diversity has become big business. This is now quite a crowded sector with a whole host of self-proclaimed ‘gurus’ falling over each other to market their expertise to law firms. Some of these individuals have something genuine to offer, others not so much. As the legal profession gains confidence in use of new techniques to consolidate its diversity gains it will surely become more discerning about who it works with.

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46 Comments

Anonymous

I also sniffed the wind, it smelled like Alex’s amateur BS.

Thanks for the ‘predictions’ though, total assessment centre gold.

(26)(14)
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Anon

Interesting point about the regional/city distinction. I graduated from a Non-Russell group University, with the minimum A level/University grades required, and I’ll be joining a City outfit next year. My pal (who i’ll happily admit is more intelligent than me) with absolute stellar grades, graduated with a 1st from UCL, opted to join a regional firm in Reading. Yet I’ll be getting paid a heck more than him, and obviously charging clients a load more too. Not really value for money…

(8)(8)
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Anonymous

Small intake at Macfarlanes,long hours working very closely with very inteligent partners and demanding clients you’ll have nowhere to hide.

(5)(1)
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Anonymous

Don’t worry, even if you get fired there Irwin Mitchell will find you so intelligent that they’ll anoint you as their new god

(12)(2)
LL and P

So what should he(I suspect not she) have said on an online forum to not come across as arrogant?

(10)(0)
Anonymous

Haha who are all these tossers blowing smoke up Macs’ arse. Good firm but so what? Talking as if only Superstars can hack it there lol.

Provided he/she’s posh (or can put it on convincingly), average intelligence and good work ethic/enthusiasm will see this person through.

(8)(0)
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Not Amused

You forgot to mention that every failed or failing business will be blaming its fasilure on Brexit 🙂

Although if you are right, and Richard Susskind finally shuts up (or is ignored) then it will be a blessed year.

(3)(3)
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Anonymous

You’re not comparing like with like, putting the regional firms against the City US firms.

A better comparison might be, say, Eversheds London vs Eversheds Birmingham (£62k vs £39k for an NQ at each office). The Londoners are getting 59% more money. The two offices will have fairly similar workloads and clients (although the Londoners will have comparatively more late nights).

So what justifies the higher salaries? Well, you can charge a client twice as much per hour for the same work done in the City as is done in Birmingham. This means, therefore, that the proportion of fees billed that go on fee earner salaries is likely to be *lower* for Eversheds London than it is for Eversheds Birmingham. In money terms, the London lawyers are more valuable to the firm (they also have more choice in terms of moving down the road if they feel they’re being undervalued).

Why do clients pay twice as much for work to be done in the City than they do for it to be done in Birmingham when it’s emailed to them anyway? Well, apart from specialist advice which is only available from a very small number of lawyers, the vast majority of whom are only in the City, I’ve never been able to work that one out.

By and large City lawyers (and I say this as a City lawyer myself) aren’t more valuable than regional lawyers: we just cost more.

(9)(4)
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Anonymous

I think you’re forgetting the fact that the living costs in London are significantly higher in regional cities. The rent I pay in London is 5 times as much as I used to pay in my regional home town, plus general living expenses and commuting costs are also more expensive than elsewhere. Yes regional lawyers get paid less but their living costs will be a lot cheaper than London lawyers, so it balances out for them.

(5)(2)
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Anonymous

Exactly. Why do you think students studying in London get a higher student loan than those studying outside of London. Its because the capital’s living costs are so high.

(3)(0)
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Anonymous

Rent in London is on average 2-3 times the price for a comparable property in most major U.K. cities (in terms of location & standard).

You’re paying through your nose at 5 times as much

(5)(0)
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Anonymous

The fact that you have to pay higher rent in London doesn’t make your work any more worthwhile to your clients. Don’t confuse cost with value.

(4)(2)
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TheLolz

Value and justification are not necessarily one and the same thing. The justification for the higher fees is the higher living costs/overheads for firms. As you acknowledge that doesn’t mean it adds value, nor indeed does it make it right.

(0)(0)
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Anonymous

“Some of these individuals have something genuine to offer, others not so much”.

I wonder who Alex thinks has a genuine offer and who he thinks doesn’t not, and also what kind of knowledge he actually has on this topic.

(6)(3)
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Anonymous

You’re reading his website which he has run for years which extensively covers developments in law firm recruitment, junior lawyer careers and student opportunities, and puts on numerous events for students focussing on entry to the profession (I’ve been to several – diversity is often a theme). I would think he has a pretty good idea.

(11)(9)
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Not Amused

Alex has expertise and a healthy scepticism.

The fact is that virtue signalling compassion narcissists are pretty easy to exploit (See Kids company). So someone has to remain sceptical (not least of all because the signallers always believe they cannot possibly be wrong).

(4)(4)
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Anonymous

The key question is how the pay for ‘newly qualified corporate solicitors in the City of London’ can ‘reach nearly £150,000’? However bright and industrious they might be, they have no experience to justify being paid the same salary as the PM, heads of Civil Service departments or senior NHS consultants. Even the best and brightest of Goldman Sachs employees are not paid that much at the same stage.

(4)(1)
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Anonymous

They are simply paid the same salaries, adjusted for the current dismal exchange rates, that their employees receive in NYC, where the firms are commonly headquartered.

Trust me, best and brightest at Goldman wouldn’t even get out of bed for £150k. They earn far, far more.

(8)(0)
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Anonymous

Trust me, best and brightest at Goldman wouldn’t even get out of bed for £150k. They earn far, far more.

That’s not really true. Year 1 associates in IBD/S&T are not going to be on much more than |£150k, bonus included, unless they are a massive star.

(1)(3)
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Anonymous

My gf is a 3rd year M&A analyst at Morgan Stanley. 190K total salary package. Don’t be a fool and compare Investment Banking to Law!

(4)(1)
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Kirkland Lawyer

If you didn’t graduate from oxbridge or lse with a finance/economics degree, forget thinking about Goldman Sachs or one of top 5 banks lmao! Although they do pay double what magic circle pay!

(2)(2)
Anonymous

Utter BS mate. I know folks at JPMC, MS and GS who studied a number of different subjects at unis like Warwick, Manchester and Leeds.

You gotta be good, excellent marks are a given, but otherwise banks are far more meritocratic when it comes to where you did your degree than you think.

(7)(1)
D&T

Correct, a junior at GS would be on £150K, I topped out far, far more than that in year two at Citibank.

If only you could control the burnout rate and hard drinking after work, you would be fine!

(0)(2)
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