18 June 2012 | By Joanne Harris
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Despite fee pressure and a slow transactional market, Northern Irish firms are recruiting in anticipation of growth driven by international work
Northern Ireland is looking beyond its borders for economic growth, seeking to increase its competitiveness and attractiveness to foreign investment. For law firms,
life remains tough, but a solid 2011 for many has led to confidence in the future.
In March this year, the Northern Ireland government published its latest Programme for Government, setting out the priorities to push the country through the next few years of development to 2015.
The plan focuses heavily on growing Northern Ireland on an international scale – boosting exports, tourism and foreign direct investment in recognition of the country’s domestic struggle.
The government wants to increase the value of manufacturing exports by 20 per cent, up from the £12.4bn recorded in 2010-11, while achieving £1bn of investment in the economy and establishing a £50m loan fund to kick-start liquidity in small and medium enterprises.
It is also committed to the devolution of Northern Irish corporation tax from the UK rate of 25 per cent, bringing it down to the Republic of Ireland rate of 12.5 per cent.
The government’s priorities are welcomed by lawyers, who increasingly rely on work flowing in and out of Northern Ireland to the Republic of Ireland, the rest of the UK or other countries.
“People here who have the skill of exporting, whether it’s even across to Great Britain or further afield, are doing well. People who are wholly dependent on the Northern Irish market are finding it tough,” observes Carson McDowell senior partner Michael Johnston.
“We’re certainly seeing more international work, there’s no doubt about that,” adds Tughans managing partner Ian Coulter.
A&L Goodbody Belfast head Peter Stafford says the Irish market as a whole, including both North and South, is becoming more attractive to businesses. “They can see merit in augmenting their international footprint,” he says.
The drive to cut corporation tax is certainly supported by lawyers in Ulster, who think it would increase the ‘whole of Ireland’ offering for businesses and the country’s attractiveness more generally.
“It’ll get us noticed and talked about and become an item on the agenda as an extra positive point,” says Arthur Cox’s Belfast managing partner Alan Taylor.
Northern Ireland’s reliance on the public sector also needs addressing. Currently, more than a quarter (27.9 per cent) of the country’s workforce is employed by the public sector, the highest proportion in the UK – although this had dropped by 2.3 per cent, or 5,000 people, in the course of 2011.
“We’re still very much overdependent on the public sector in Northern Ireland,” says Johnston. “We really need to get away from that dependence and it’s a case of trying to get the private sector to grow and become more attractive.”
Stafford says the government’s focus on export is a good place to start, pushing the emphasis from public to private. His colleague, A&L Goodbody Belfast corporate head Mark Thompson, suggests a decrease in corporation tax would be a “key tool” to help the process and adds that focusing on the positive rather than negative would be a good tactic.
“A different view is to consider what we can do to assist the private sector to grow,” he adds.
Taylor says that more incentives are needed to encourage people to move from the public to the private sector, or to return to Northern Ireland from jobs elsewhere in the UK or the Republic.
Some Ulster law firms identify a hole in the M&A market at present, which means that while activity at the top and bottom end of the market continues, there is little in the mid-tier. “Where liquidity isn’t a challenge because buyers are listed companies or have large amounts of cash sitting on their balance sheets, these deals are happening,” says Stafford.
Coulter says Tughans is picking up work for venture capital firms, particularly from Great Britain, but notes there is “not a lot” of purely domestic Northern Irish business-to-business work.
But Taylor disagrees. “I wouldn’t say that there was any less mid-market activity in any area other than property,” he argues. “I’d say that activity in each layer isn’t bad at the moment.”
Under fee pressure
For law firms, a major challenge continues to be fee levels.
“You have to recognise that every single industry in Northern Ireland has had to adjust its pricing. It just means that you price things differently,” notes Coulter.
Reports of rock-bottom fees in recent tenders are common, but some firms are trying to resist the temptation to lower prices simply to win work and are instead focusing on quality.
“We take longer to think about where we want to pitch our fee levels for different types of work,” says Stafford, warning against joining a “race to the bottom”.
His words are echoed by Johnston. “Everybody tells you not to get involved in a race to the bottom. We see ourselves as providing a really good service and we just can’t do it at these rates,” he says.
Nevertheless, despite the fee pressure, firms have reported a solid year. At Carson McDowell, turnover was up 10 per cent last year. Coulter says Tughans does not disclose turnover, but says 2011-12 was a “very strong year” in which the firm recruited heavily.
Arthur Cox was also recruiting and Taylor says he is reasonably positive about the future.
The structure of the legal market itself has not changed much over the past year, save for the entrance into UK top 20 for Pinsent Masons through a merger with Scottish-headquartered McGrigors, which had entered Northern Ireland when it tied up with L’Estrange & Brett in 2009. The change of brand has had no impact yet, say those in other Belfast firms. Likewise, the back-office functions set up by Herbert Smith and Allen & Overy in Belfast have not had an impact on the day-to-day work of Ulster’s full-service firms. Regional development agency Invest Northern Ireland is said to be keen to attract more firms to Ulster to run a similar model, but so far none have signed up.
The government’s efforts to improve the attractiveness of Northern Ireland have led to a sense of optimism among the legal community, although this comes with the caveat that the spectrum of work being done is broader than ever before. As Coulter notes, the remainder of 2012 is likely to remain challenging, but there are certainly opportunities for those prepared to look for them.
Although like many other parts of the Northern Irish market the legal sector has been in the doldrums in recent years, there are signs that things are picking up, according to Lindsey McCracken, legal recruitment consultant at Brightwater Recruitment.
“Over the past 18 months, we have witnessed an exciting turnaround in the Northern Ireland legal market,” she enthuses. “After a period of uncertainty, the market has been reinvigorated with the arrival of a number of international firms such as Allen & Overy, Axiom Law and Herbert Smith, which all chose to set up their legal operations in Belfast. As a result, there are plenty of opportunities in the commercial, corporate and litigation areas, but there are too few candidates with this experience.”
Although the situation is not completely rosy, warns McCracken, things are starting to pick up. “At the beginning of the year, there was a tendency towards hiring legal professionals on shorter contracts as opposed to committing to a permanent position. However, larger firms now seem to be much more confident about committing to permanent hires,” she explains.
“Smaller local firms are still hesitant about committing to permanent hires but there’s a general consensus that they are regaining confidence in the market and will be looking to hire again in the next six to 12 months.”
There are also growing numbers of opportunities in the in-house arena, says Liam Taaffe, head of in-house at GMK Legal. “A number of multinationals have established offices in Belfast and there is a need for commercial lawyers with experience of working within the manufacturing industry,” he says.
In a market where the number of lawyers arguably outstrips demand, how can young lawyers make themselves stand out in such a competitive market?
“Go out and network, don’t just rely on your professional institute to make relevant contacts,” stresses McCracken. “Go out and meet local business people in your local Chamber of Commerce. Take on voluntary work with charities, which helps you both utilise your legal knowledge and enhance it.”
Experience in London or further afield is also a key selling point.
“It’s always a good idea to have some experience in London under your belt, which will make you a much more attractive proposition to Northern Ireland firms,” comments McCracken. “Those candidates with any kind of international experience are also particularly in demand, so for those who are looking to relocate back to Northern Ireland, it’s a good time to do so,” she urges.
Many lawyers may be put off by the salary situation though, points out Lynne McCarroll, director at GMK Legal. “Lawyer salaries are still very low in Northern Ireland, which is a major problem for mid-level lawyers. Although there are opportunities in Belfast for mid-level lawyers, they see little point in leaving for the same salary.”