finance

London’s law firms should take heed of new threat from US rivals


Where Kirkland & Ellis goes, others eventually have to follow. That is the major lesson for law firms of recent years. Which makes Kirkland’s move to cut the time it takes to become an equity partner all the more galling for London’s elite practices.

Across the City, partnership tracks have lengthened. Mid-rank lawyers are stagnating below partnership level. A decade ago, it took on average eight years after qualifying to make partner at the Magic Circle’s London offices (excluding the anomaly that is Slaughter and May). This year’s cohort at Allen & Overy, Clifford Chance, Freshfields and Linklaters averaged more than 10 years of post-qualification experience.

Allowing that trend to continue will hurt the UK firms already feeling the pinch from American rivals. They have lost the transatlantic war on pay. They are leaching mid-level associates. They can ill-afford to lose a fight over the path to partnership.

Kirkland may not have the same influence on industry standards on partner track as it did with pay. The firm’s structure differs from the UK establishment in a number of respects. It is quite free with the title of partner, bestowing it on the equivalent of senior associates elsewhere. It is less free with its equity. Many Kirkland partners get no share in the profits, just a better business card.

But firms should pay heed to last week’s announcement all the same. Because if they fail to compete, they risk slowly becoming repositories of second-tier talent.

Clearly the main motivator for delaying partnership is monetary. Since the financial crisis, UK firms have struggled for growth and ceded share to US rivals. Yet many maintain a structure where partnership is more or less for life. That constrains how many people firms can promote while preserving the ratio of profit per equity partner. That is the key metric on which their success or failure is judged and pay determined.

The reasons why partnership takes longer are not all bad, either. Large law firms have been among the best at elevating women in recent years, data from PwC’s annual law firm survey show. Women are more likely than men to take time out of their careers for parental leave. That might lead to a longer gap between qualification and joining the partnership.

But other justifications ring hollow. Some partners point to a lack of experience among mid-level lawyers. There are nuances, but overall the view is hard to square with the enduring horror stories about workloads on the front lines.

A period of frenetic dealmaking activity has stretched the industry thin. Top UK firms find themselves short of the sub-partner resources they need to run transactions and handle churn. They have held off promoting this group, pacifying them with title inflation.

That will only take firms so far. Partnership is the difference between the income of the 1 per cent and the 0.1 per cent.

In an industry where overwork and burnout are rife and retaining talented juniors is difficult, dragging out the period during which associates slog it out for partnership spots is a problem. Senior partners should not underestimate the jeopardy.

More lawyers are already ditching firms altogether. In 2020, almost a quarter of all solicitors in England and Wales worked in a company, according to research from trade body TheCityUK. A decade ago it was only 16 per cent. Life in-house is not always easy, but does tend to be easier than life in the Magic Circle.

For those willing to stick it out, the lure of partnership has been a key plank in City firms’ defence against American dollars. If elite US firms in the UK capital can successfully challenge that, it could be highly damaging to the Magic Circle. Offering equity more quickly is part of it. To truly threaten, US firms will have to offer it more widely in London, too. But it would be a foolish senior partner who underestimated that possibility.

There are many more career paths in law than there were even a decade ago. Ultimately, though, for many solicitors the prize is partnership. By making that process ever longer, firms risk stretching a period of intense work beyond what talented individuals can sustain. London’s Magic Circle has already lost some of its lustre. Trimming the path to partnership could increase UK firms’ attractiveness once more.

cat.rutterpooley@ft.com

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