Analysis

MoneyLaw could be the new Magic Circle

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£124,000 newly qualified rate may prove a London game-changer

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The term ‘Magic Circle’ was coined by the then-dominant The Lawyer Magazine in the late 90s when Tony Blair was in charge of the country, Britpop ruled the airwaves and junior lawyer pay in the City was generous but not entirely out of kilter with legal aid, medicine or journalism.

Twenty years on and we live in a very different world. The internet has seen the traditional media’s influence wane, while the Oasis-soundtracked good times of the unsustainable Blair years have given way to a very different age.

Since the financial crisis in 2008, vast chasms have opened up in young professionals’ earning power — as exhibited by the MoneyLaw trend sweeping the City that is seeing newly qualified (NQ) solicitor pay at some elite law firms rise to £124k. Salaries in many other jobs have pretty much flat-lined for close to a decade now. No wonder all the best graduates these days want to go into corporate law.

But this flood of top young legal minds hasn’t, as you might expect, driven down pay. Rather, the larger pool has been divided into lanes of talent by ever more sophisticated graduate recruitment teams who now assess on everything from grades to streetsmart. Unsurprisingly, every firm wants the star candidates who have it all. And flush with cash that has worked its way from government quantitative easing programmes to their bank and financial institution clients, they are willing to pay for them.

Hence MoneyLaw. So far, seven London offices of US firms have put rocket boosters on their already pretty amazing £100k NQ salaries to propel them to an astonishing dollar-tied figure that is fluctuating between £124-£127k. Five of those firms — Milbank, Cadwalader, Akin Gump, Davis Polk and Simpson Thacher — have only a handful of trainee and NQ positions in the UK. But the other pair — Kirkland & Ellis and Latham & Watkins — offer annually 12 and 20 training contracts respectively, which is in the range of major UK firms like Osborne Clarke and Olswang. The race to secure the best graduates will surely force others to follow.

But which will stump up the extra cash? Traditionally, the London-based magic circle firms — Linklaters, Slaughter and May, Allen & Overy, Clifford Chance and Freshfields — have been happy to sit back and let US firms in the capital lead the market on pay. The elite UK quintet has done this safe in the knowledge that their reputation for quality of training, more civilised hours and better partnership prospects would help them attract their fair share of hotshots. But in recent years that reputation has begun to be questioned as US firms’ London offices promote more of their young, and magic circle rookies complain on forums like Legal Cheek that they are actually working just as hard as anyone else while not always receiving the greatest training.

A sign of magic circle anxiety that students’ perceptions of what they offer is changing was illustrated last year with Allen & Overy’s move to up its pay by a quarter to £78,500. Linklaters, Clifford Chance and Freshfields responded with rises above the £80k mark. Previously this was US firm territory. And then came MoneyLaw. What to do?

In the short term, don’t expect the magic circle to match Kirkland and the rest in the UK. Indeed, Clifford Chance and Freshfields have already announced that their recent US pay rises won’t apply to English graduates. But with partners at the seven London MoneyLaw firms privately licking their lips at the prospect of raiding the qualifying cohort of their lower-paying rivals this summer, this position may have to change.

With the new £124k benchmark likely to hold over the next few years — such big jumps in corporate lawyer pay tend not to be topped significantly for a few years — a new MoneyLaw elite looks set to gradually emerge. There will probably be some magic circle firms in there. But will all of them be represented? There might well be some firms in that class previously known as the ‘silver circle’ (some of which have transformed themselves into global megafirms over recent years via series of mergers). But again, plenty will probably hold back. It takes a certain type of business — financially but also in terms of organisational culture — to pay kids just out of their training contract £124k.

Of course, there is more to life than money. And it’s possible that the magic circle may be able to re-assert its reputation for offering the best training and culture via its old tactic of shelling out a few quid for fancy adverts in the traditional legal press. But will social media savvy students be so easily persuaded in 2016?

38 Comments

Adam

“No wonder all the best graduates these days want to go into corporate law.”

This insulting statement embodies everything which is wrong with Legal Cheek, graduate recruitment, undergraduate careers advice and the Legal Practice Course all at once.

To say that’s where “all” the best graduates go is a sweeping generalisation and manifestly unfair to any strong candidate that decides not to go into corporate. It is also a very unfortunate image to project onto the future clients of those candidates, who would be led to believe that if their lawyer was any good, they wouldn’t be doing this sort of work in the first place.

I would urge you to reconsider that daft and unfortunate slur.

(32)(24)

Working journalist

The reality, unfortunately, is that the best candidates frequently do choose to go to the commercial end of the profession – ‘all’ may be a push but it’s not wildly wrong.

A few high-fliers go for the sexy international human rights/admin/public end of the field, but the number of people actually practising in that area is much lower. Ditto crime: the creme de la creme will typically head straight to the Outer Temple-style chambers or Peters & Peters-style boutiques that specialise in complex corporate crime work, the academic credentials of people who head straight to the mags tend to be somewhat lower.

The statement isn’t anywhere near as outlandish as you’re making it out to be, and it isn’t really a ‘sweeping’ generalisation to point to the fact that the overwhelming majority of superstars head straight for the big bucks instead of slogging out on legal aid work. It’s regrettable, but it’s true.

(21)(4)

Anonymous

I’d rather not have to live in London though…and that’s not because I’m not “top-grad”, it’s because I don’t want to live in London….

Some mid sized London firms offer a good work life balance, but the balance will still be more in the favour of work than most jobs out there. Leaving at 7 shouldn’t be considered a “good work life balance” imo. In any case, some mid firms may work you just as hard as MC, for less money, so do your research and talk to trainees first kids!

(7)(9)

Anonymous

Working until 7 is the norm in most regional commercial firms as well. Compared to what is expected at the magic circle and American firms – 7 is a good work life balance.

(2)(0)

Adam

I still think there are a significant albeit small minority of individuals who subscribe to the (now extremely unfashionable) viewpoint that law has a sense of vocation. It is for those people that statements such as Mr Aldridge’s in this article would leave a very bitter taste.

The implication is that if you’re not voluntarily signing up for corporate law, you must be second-rate. I think it’s reasonable to take issue with that core message.

(4)(1)

Anonymous

I find that a lot of the people signing up for corporate law, especially those who do it via the GDL route, just aren’t “lawyers” – yes, they know a bit of what has been rammed into them on the GDL, but it’s wafer-thin stuff and once they go into M&A or something, it all falls away anyway. We have a huge issue at our firm with junior associates being incredibly narrow in their understanding of the law. They may be technically strong and smart people, but give them anything unstructured and they tend to produce relatively low quality work.

(6)(2)

Working journalist

The implication is mostly in your head.

(0)(0)

Anonymous

“academic credentials of people who head straight to the mags tend to be somewhat lower.”

Have you even looked at the profiles of junior barristers, or do you just enjoy making things up?

(0)(2)

Working journalist

Are you suggesting that most bazzers doing low-level criminal work have academic credentials on par with most people who do commercial work?

Because if so, blimey, that tells me you yourself haven’t really looked into it.

(1)(0)

Anonymous

As a law graduate you have a choice either enter the city earn lots of money and your career be your life. Or you go for a regional firm earn a lot less money and have a life/work balance. To imply that those who chose the latter as not good graduates is slightly insulting. Not everybody wants to work in the corporate city. Good on those who do and clearly they are very capable hardworking people but to imply that those of us who elect to work outside of London are somewhat falling below the mark is ridiculous.

(17)(8)

Anonymous

Or you go to a mid-tier firm in the City where the training is also excellent, the pay is decent, but you also have a better work/life balance than the US/MC firms…

(14)(1)

Anonymous

I agree with you on that. Sorry didn’t make my point overly clear/

(1)(0)

Banter & Lash

Heh, does Irwin Mitchell belong in this mid-tier you speak of?

(6)(0)

Anonymous

In a word, no.

(5)(1)

Dungeon Trainee

I think their morbidly obese partners might have an issue with your statement.

Everyone knows Irwin Mitchell is the most prestigious firm in the City, right next to Pinsents.

(13)(1)

Ohmehearties

not forgetting Addleshaw of course Dungeon. Although admittedly it doesn’t have a strong PI practice, which is all the rage nowadays. The days of cross-border M&A and private equity deals are gone. PI is the way forward, of course – all for the prestige. Working with the claims management companies and their made-up claims. Very exciting!

(4)(0)

Bantah

Don’t forget Trowers.

Excellent shop, massive M&A, titanic deals, top firm even.

(1)(1)

Not Pinsents, just curious MC Trainee

I understand Trowers and Irwin Mitchell, but why does Pinsent Masons get a bad rep?

Anonymous

It’s a firm chock-full of sociopath toffs?

Irwin Mitchell toiler

They don’t pay shyte. Irwin Mitchells on the other hand…

Anonymous

Which SC law firms do you anticipate raising wages ?

(4)(0)

Anonymous

None, the partners don’t part with their PEP dolla.

(1)(0)

Anonymous

Potentially HSF?

(1)(1)

dat dere equity partnah

Doubt it buddy. Too highly geared to be dropping massive raises. 5-10% tops.

(6)(0)

Anonymous

Hahaha, I wish!!

(0)(0)

Anonymous

But the article said some SC firms might increase wages.Which ones???

(0)(0)

Tyrion

I’ve said it before, any magic circle corporate/finance team that says they provide a better work/life balance or partnership prospects than the US firms in London are straight lying.

(6)(0)

BobBobBob

It is incredibly unusual for US firms in London to make up equity partners from within their own ranks. Their clear preference is to lateral in established partners from the magic circle.

(2)(4)

Anonymous

lets be honest…all the best graduates go to the bar…

(7)(16)

Anonymous

this isn’t accurate – Akin have only given the increase to their US associates working in London

(0)(3)

Anonymous

Ashurst have massively increased US NQ pay . Does anyone know if they intend to increase UK NQ too ?

(2)(1)

City slave

Forget about it – a shyte outfit like Asshurts won’t be upping anything anytime soon.

The partners are too busy saving up for another BTL property, sorry.

(6)(0)

Anonymous

Probably (they can’t go on at £65,000 when Travers and Macs are hitting £70k) but unlikely to top £70k.

(1)(0)

Anonymous

Will Travers increase salaries ?

(1)(1)

Dat dere Travers bloated top of equity partnah

Yeh, soon bruh. Now get back to work!

(10)(0)

Anonymous

How do people stomach corporate law, even with high pay? It’s so soul-destroyingly boring. I reckon trainees have to sort of brainwash themselves to find it bearable and then they become obsessed with the firm, like cult members obsessed with the Leader.

Corporate lawyers don’t even practise much law. Dull and skill-free.

(5)(5)

Anonymous

k

(0)(1)

Bantah commando

How’s dem PI claims at Irwin Mitchells going? Hope your supervisor ain’t too flatulent.

(5)(0)

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