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Discounts dwindle as magic circle rates soar to over £700; rises across the board
Magic circle partner rates have bounced back to levels not seen since before the recession, according to an annual survey of hourly rates.
Research by leading costs lawyer Jim Diamond on behalf of The Lawyer claims that magic circle partners are again charging as much £725 per hour.
Last year was reportedly the first in more than a decade in which fees charged by the UK’s elite firms fell, when they were reported to be charging an average hourly fee, including discounts, of £450.
While this year’s figures are an average of the firms’ headline rates and do not include reduced rates, Diamond claims firms are becoming increasingly reluctant to negotiate significant fee reductions.
Even magic circle five year-PQE associates now charge an average of £450-£550, a top tariff increase of 38 per cent compared with 2008. Diamond has accused in-house counsel of talking tough on driving down costs but continuing to pay “astounding” fees.
The research also reveals that 2010 was the first year in which US firms in London broke through the £600 barrier. US firms in the City have traditionally opted for a business model of keeping hourly fees down and productivity high, but the latest figures suggest a diminishing workload has brought this system under scrutiny and forced firms to push up their headline rates.
The London-based general counsel at one Nasdaq-listed company believes the trend also indicates a flight to quality.
“You could ask whether any lawyer is worth £600 an hour, but it’s all market-driven,” he said. “In many ways US firms are as good as the magic circle, if not better. In some areas, such as high-yield, no UK firms can compete with them.”
Another surprise finding is that, while the bottom end of City partners’ average hourly rates outside the magic circle have remained static at £375, some are now charging an all-time high of £640 - a figure confirmed to The Lawyer by several in-house counsel.
Fees at national firms have remained largely stable, with partners charging between £325 and £350, and five-year associates between £250 and £300. The 2009 partner average was £325 and £250 for associates.
Simmons & Simmons managing partner Mark Dawkins claims that, while magic circle headline rates remain high, in some practice areas they are continuing to drop prices in a bid to undercut their non-magic circle rivals. He also believes there is no sign of clients easing their demands.
“I haven’t seen anything to suggest clients aren’t as budget-conscious now as they were last year,” he said. “When it comes to fees, clients want a combination of certainty, transparency and value.”