Devolution may have caused some ructions for Wales, but it has also inspired an economic boom. Julia Cahill reports on the benefits that independence has brought
It has been a politically turbulent year for Wales since power was transferred to the Welsh National Assembly last July. Economically, though, these are good times for the principality.
Behind the scenes of devolution, law firms in Wales are lapping up a steady flow of work: from the new parliament, the Welsh Development Agency and other public sector clients, as well as from a corporate scene that appears to be turning the M4 Corridor into a UK Silicon Valley. The prospect of EC Objective One Funding has also made Swansea a magnet for investment.
Indeed, the impact of devolution goes far beyond the political.
“One of the key features of devolution is proving to the outside world that Wales is capable of providing a professional support network to businesses in Wales,” says Morgan Cole‘s director of business services Bleddyn Rees.
It is still early days. The implementation of Objective One Funding has been marred by controversial delays. But times have certainly changed. “Fifteen years ago, high-quality commercial work would have been dealt with in the City, as it was in all regions. But as local firms have grown, they’ve been retaining more of that work,” says Rees, who can count BP Amoco and British Energy among his firm’s clients.
It is a shift that has been repeated across the UK, but the difference here is the overwhelming political and economic desire to see work remain in Wales. Rees explains that it is part of the principality’s raison d’être. “We live and work in the principality, so it’s in our direct interest to see it succeed,” he says.
SME-focused Hugh James Ford Simey and Edwards Geldard are also cashing in on the boom. “All in all it’s created a great demand for quality staff,” says Matthew Tossell, managing partner at Hugh James, which set up a retail lending department last September, giving a strong indication of the new climate. Involvement in multi-party actions involving former Welsh miners with respiratory illnesses and vibration white finger has also raised the profile of the firm, and it is now advising on claims in Yorkshire and in the North.
Within this revitalised climate, both Hugh James and Edwards Geldard are struggling with the traditional shortage of commercial property specialists. “It’s been a vintage year – particularly on the corporate side – and a boom year on the commercial property front,” says Huw Williams, head of public law at Edwards Geldard. Williams has spent much of the last 12 months outside Wales, advising on the Bloody Sunday Inquiry, a sign of the vast scope of work available to Welsh expertise.
His firm retains a diverse list of clients, which includes utility giant Hyder, Citibank (for IT and IP work), the Farmers’ Meat Project, which it advises together with Eversheds, and local bakery entrepreneur Harry Kear of Kear Bakeries.
“It’s an exciting time to be practising here,” agrees Peter Watkin-Jones, Eversheds’ head of commercial litigation in Cardiff and client partner to the Welsh Assembly. His firm is the sole external adviser to the assembly’s in-house legal team, which puts Eversheds in a position to become involved in potentially groundbreaking work.
“There is quality commercial legal work in the Cardiff area with the added spice of the exciting developments that devolution has brought,” says Watkin-Jones.
Bridgette Wilcox, company and commercial partner at Eversheds, is enthusiastic about the firm’s resultant future role. “Clients need to be aware that there’s going to be a need for lawyers who know and understand the local market and the laws of Wales. There will be deviations from England in areas where the National Assembly has been given power,” she says.
The firm is deeply involved in the local commercial scene and the public sector, but as for its Welsh competitors, a substantial proportion of work is coming from outside the principality from clients such as Deutsche Hypo Bank, Investec Bank and Sterling Industries. Watkin-Jones estimates a 50/50 split between domestic and outside work for the Cardiff office.
Across the Severn Bridge, Bristol lawyers are also harnessing more work from outside the region. Bevan Ashford’s head of projects and PFI, Steve Hughes, estimates that more than 80 per cent of his work comes from outside the South West. His department has worked on more than 100 PFI projects, receiving 23 new instructions last year.
“There’s increasing awareness that regional firms like Bevan Ashford can provide the same level of expertise as City firms, with considerably reduced costs,” says Hughes. But he also sees the firm’s small London office as a key to this growing success. “You need a London base for this type of expertise. A lot of clients are based in London, so if you want to grow in the private sector you need a City presence. It’s the centre of things. That’s where all the lenders are.”
Geographically, Hughes’ PFI clients do not peter out until the Midlands, where they start looking to Leeds and Manchester. The result is that competition comes largely from national and City firms – Pinsent Curtis, DLA and Eversheds – rather than from Bristol itself, where the main competitor for PFI is Burges Salmon. Eversheds’ Bristol office has remained small.
The key to success in Bristol’s crowded legal market seems to be just the kind of differentiation that Bevan Ashford has fostered by increasing its strength in PFI.
For Osborne Clarke, differentiation means dominating the market for corporate and IT work in Bristol. Three years ago, corporate turnover for the office was £3m. This year it is expected to reach £6.5m, with the biggest impact coming from technology. “We took the view about five years ago that Silicon Valley in the UK was Reading, but that it was likely to broaden out from there to be an M4 Silicon Valley. I think the last two years have confirmed that view,” says Simon Beswick, Osborne Clarke’s head of corporate law in Bristol.
So while 30 per cent of corporate turnover comes from outside the South West (and rising), the rest comes from businesses in the region. Much of the turnover is generated by spin-offs from business incubators that have set up in Bristol, including Orange, Hewlitt Packard, Toshiba and Siemens. Pre-paid mobile phone company Aethos Communications, a spin-off from Orange, is just one example of this kind of client. Beswick’s office advised on Aethos’ first and second round of fundraising and on its £47m sale to Logica 18 months ago. Its founders are now reinvesting locally.
Virgin Phones became an IT client two months ago after setting up in the west country; and further afield, clients include Anglian Water, the Manchester-based Locker Group and the Clondalkin Group in Dublin. Beswick expects his access to non-indigenous work to continue. “There is slowly becoming a national market for corporate finance, and we want to be one of the law firms to service it,” he says.
So what does the future hold for Bristol? Is there room for another major player in this competitive, fast-moving market? TLT, the product of a merger between Lawrence Tucketts and Trumps in May, certainly believes there is. Clients of both firms were consulted before the merger and welcomed the idea.
“There was a need for another, larger corporate firm in Bristol,” says business development partner David Pester. “And there’s a lot of expectation as to what we’ll achieve.”
The new firm is already acting on some big-ticket sales and acquisitions, and has an impressive banking and lender services client list, which includes the likes of Barclays, Lloyds TSB and Bristol & West.
Only time will tell whether Bristol has room for another major player. But there can be no blaming the newly branded firm for its determination to join the top handful of firms in Bristol and Cardiff as they ride high on a growing influx of work that would traditionally have passed them by. City beware.