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