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Partner rates at US firms in London have spiralled 87.5 per cent since 2009 with top-end hourly rates hitting £700 per hour, according to new research.
An annual hourly rates survey carried out by costs lawyer Jim Diamond has revealed dramatic increases in charge-out rates across the UK legal market, with magic circle rates up 62 per cent since 2005 (26 November 2013) and US firms charging almost 90 per cent more than they did just four years ago [see box].
US firms in the City have traditionally opted to push hourly fees down and productivity high to compete with domestic firms. Rates started soaring in 2010, when they rose by 50 per cent from £400 to £600 in a year (20 September 2010).
The continued increase suggests a diminishing workload has put the traditional low rates under pressure, forcing firms to push up headline rates, experts suggested.
However partners inside US firms suggested the financial crisis pushed figures to an “artificially low” level in 2009.
“If you look at the rise in areas of work such as internal investigations and white collar crime, these are incredibly sensitive areas where there’s likely to be higher rates,” said one New York-based partner.
Revenues have risen across the board for US firms in London, allowing firms to take advantage of the brightening economic outlook and pushing up rates to compensate for discounts.
Of The Lawyer’s top 30 international firms in London, all but seven saw UK revenues rise in 2012. This marks a turnaround in fortunes from 2009, when 21 of the top 30 firms saw year-on-year falls in UK fee income.
Earlier this week Diamond, whose research is conducted during the course of his work as a costs lawyer and legal costs consultant, commented that his findings, both for the magic circle and US firms, were “off the Richter scale” and exposed a “shocking” rise in fees over recent years.
However the rise of fixed rates and alternative fee arrangements has led some lawyers to question the relevance of measuring headline figures, given the disparity with the hourly fees firms actually receive after discounts are taken into account.
Firms are continuing to offer discounts of up to 25 per cent, with some turning regularly using fixed-fee deals and bulk contracting as a way of offering cost control to clients.