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The problem with low cost legal hubs is that law graduates don’t want to work in them

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Students say ‘no thanks’ to northshoring

It was the dawn of a grand new vision for City of London law firms.

Keen to cut costs at a time of brutal market conditions following the 2008 financial crisis, they began dabbling in outsourcing to cheaper overseas locations like India. But in many cases working across time zones and cultures was more difficult than anticipated. Unperturbed, the firms turned instead to less wealthy parts of the UK where they set up ‘low cost hubs’ in cities such as Belfast, Glasgow, Newcastle, Manchester and Birmingham.

There were bumps in the road but the strategy seemed to be a success, with early movers like Allen & Overy and Herbert Smith Freehills expanding their ‘northshoring’ operations significantly since launching in 2011. Initially they focused on non-legal tasks, but as momentum grew increasingly lower level legal work was sent north.

With the big UK regional cities well served by universities and law schools, there was confidence that a plentiful stream of adequately trained graduates would be on hand to do this work at budget rates — propping up stagnant but still huge partner profits down in the Capital as low growth conditions lingered. But that assumption has sometimes proved wide of the mark.

Law graduates have aspirations beyond staffing second-tier offices as paralegals, it turns out. Instead, they want training contracts, preferably in London. And where they don’t succeed in this aim, many would rather use their still valued law degrees to pursue alternative careers in other high status fields like finance, PR and marketing for big companies or exciting start-ups. The lure of a watered down law career isn’t as strong as those who run the profession are prone to assume.

This reality is proving problematic. Some firms have responded by offering their northern paralegals career paths, with Allen & Overy leading the way by introducing training contracts in Belfast in 2014. Others are incorporating northern hubs into their trainee secondment roster as a way to boost numbers. Indeed, Berwin Leighton Paisner, which has a hub in Manchester, announced such a move this week.

Still, rumours of unhappiness persist. The commercial legal market is full of chatter at the moment about low cost hub staffing issues. One paralegal recruiter recently told me how much harder he finds it filling northern roles than London positions. Another admitted paying the travel costs for several London-based paralegals to staff a project in the Midlands after failing to find any suitable local candidates. Meanwhile, the recent decision of Mayer Brown to expand its UK volume business from London, rather than try its hand outside the Square Mile, has been noted as a signal to the possible future direction of travel at a time when a glut of new office space could place downward pressure on London rents.

So what will happen next? The most extreme scenario would be for some of the less established regional hubs to be scaled back or even abandoned. But perhaps a more likely outcome, given that most hubs have been broadly successful and not inexpensive to set up, is some form of rebranding. Working for a big firm’s Manchester office would be far more attractive to graduates than a gig at its Manchester low cost support centre (even if the terminology doesn’t quite send out the desired message to cost-conscious clients).

However, that may not go far enough. It’s an open secret among multi-office law firms which avoid the low cost hub model that some regional locations can be much harder to fill with graduates. At a time of unprecedented pay discrepancies between London and the rest — in some cases newly qualified solicitors in the City are paid, absurdly, more than three times those outside the M25 — could this graduate supply problem be about to force a wave of regional pay rises?

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