Analysis

Four predictions for corporate law this year

By on

What to expect in the City during 2017

Lead1

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.

For all the latest commercial awareness info, and advance notification of Legal Cheek’s careers events, sign up to the Legal Cheek Hub here.