Price cutting ploys will 'backfire'

LAW firms are slashing fees and even offering to work for nothing in order to win beauty parades, it is claimed.

But the trend for short-term price cuts will buy turnover not profit and will eventually backfire against fee-desperate practices, says a leading City lawyer.

David McIntosh, senior partner at Davies Arnold Cooper, told a marketing conference that struggling law firms were competing for unprofitable work as long as it contributed to covering the cost of overheads.

He also said that provincial practices which had ventured into London claiming to offer “City quality at country rates” risked financial problems when favourable rent deals expired.

“It is only a matter of time… before at least one of these firms will become another casualty. If not countrywide then certainly in London, where whatever the hype to the contrary, they are and will continue to be out-gunned by the well-established London firms,” he said.

But the provincial high-flyers reckon McIntosh has got it wrong and his comments reflect his own concerns about increased competition.

Paul Rhodes, managing partner at Dibb Lupton Broomhead, says: “With regard to this firm, and some of the others he may be alluding to, such as Pinsent & Co and Hammond Suddards, we are not going to go away. We are here to stay.

“We do not need rent-free periods to be competitive on price against firms like Davies Arnold Cooper,” says Rhodes.

“Anyone with half a brain started paying rent immediately and this was gradually increased. People do think prudently financially so I can't understand what he means.”

McIntosh told the conference that law firms should not waste time and money competing for inappropriate work and should conduct more research before accepting an invitation to tender.

“In one beauty parade for a foreign bank, in which my firm and one other were the only paraders, we lost because the other well-known firm offered to do the job for nothing – presumably in the hope of keeping the client for better times. On that basis they are welcome to the job,” he said.