Gloom sets in as continuing credit crunch fuels fear of redundancies
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Lawyers are becoming a gloomy bunch as the credit crunch intensifies, with 12 per cent of practitioners who responded to a YouGov survey predicting that there will be redundancies as a result and 34 per cent claiming there will be less work to go round.
The figures, which come from a survey by YouGov-Centaur for The Lawyer, offer a snapshot of market opinion that appears to confirm some of the fears and rumours that are rumbling around the London and regional offices of law firms of all sizes. The survey took a cross-section of lawyers from all levels, asking more than 1,500 for their opinions.
The level of pessimism among lawyers increases as the lawyers' seniority decreases. The report found that 51 per cent of associates think there will be less work as a result of the credit crunch, which is almost double the level registered by partners in management positions, 26 per cent of whom think deals will ebb.
Similarly, 14 per cent of associates feel there will be redundancies, compared with nine per cent of management, who are the ones with their hands on the axe. This may indicate that law firms are not doing enough to reassure their fee-earners that their jobs are safer than they think.
David Ereira, a senior banking and finance partner at Linklaters, admits: "We could always do more. I think it's partly because associates read the headlines and get a bit scared. It's an all-new experience for many of them.
"I think as well that there's a lot of talk in the financial sector. Many associates have friends and contemporaries in banks and they listen to those conversations."
There is always the cynical possibility that management is not dispelling the credit crunch fears to balance out the carrot with a bit of stick. Associates are more motivated to ask for more work if they think their jobs are under threat.
But the associates who remember the heavy cuts during the last slowdown may be reassured that it is unlikely that there will be the same level of redundancies this time around.
Law firms claim to have learnt since then that it is harder to hire the right people than to fire them. Get rid of too many and you hamper your own recovery when the sun shines once more.
"In 2000 law firms were in denial," states Ereira. "But then in 2001 and 2002 the numbers started to go down and the firms took drastic action. I think people are being more sensible now to avoid problems in the future."
Job cuts are more likely to hit the highly specialised practices such as securitisation of US real estate assets, which have all but completely dried up, rather than strike out whole swathes of finance lawyers.
That said, lawyers in the bigger firms are more likely to think their firm will suffer financially as a result of the credit crunch.
For example, the survey found that 38 per cent of lawyers in firms with more than £250m annual revenues, which equates to the UK top 10, thought there would be a financial hit, whereas only 24 per cent thought the same in firms turning over between £100m and £250m.
The discrepancy is down to the fact that the mega-deals of 2007, which were lapped up by the bigger firms, are now just a fond memory. According to lawyers in the market, there is still a moderate flow of smaller deals. Ereira says: "We're not seeing the very very large acquisitions and we're not seeing quite the volume of private equity activity. In a way there was a period last year when people in that sector were doing unsustainable levels of work.
"I think the current position is that work levels are reasonably robust. In some practice areas the areas are lower than they were this time last year, but overall that's not highly significant."
But while the big deal rainmakers are quietly enjoying the slowdown and seeing their families for the first time in months, the financial litigation and restructuring lawyers are just gearing up for a long haul.
The YouGov report found that 29 per cent of litigators think there will be more work as a result of the credit crunch, with 42 per cent of insolvency lawyers agreeing with them.
Richard Bunce, banking and capital markets litigation partner at Simmons & Simmons, comments: "Certainly in terms of finance litigation, none of our associates expects the workload to diminish any time soon. I think we'll do well.
"The rise in the number of inquiries has been significant. That includes financial institutions looking at positions that they hold in other people's securities - for example in the form of structured investment vehicles and collateralised debt obligation, as well as facing their own investor issues."
The work done by structured finance lawyers over the past few years, during the rush for complex financial products, is now being picked over by their litigation and restructuring colleagues down the hall. Objectively, law firms should not mind either way so long as the bills are coming in.
The credit crunch can mean many things to many lawyers. As The Lawyer's YouGov survey shows, to some associates it means time spent nervously biting fingernails, and to others a hike in work volume. But few people who draw their salaries from law firms can afford to remain impassive.
The survey of nearly 1,700 respondents was conducted by YouGovCentaur for The Lawyer. To join our legal poll panel, go to http://legal.yougovcentaur.com