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The faltering Portuguese economy has forced Linklaters to cut half a dozen associates from its Lisbon office as the country’s lawyers warn of a tough year ahead.
In a move almost unheard of in the Portuguese legal market, Linklaters has asked six associates from four different departments within its Lisbon office to leave the firm.
The decision was made amid tumbling transaction levels in the country and a frozen projects market.
Linklaters is left with 28 fee-earners in its Lisbon office, including six partners and two counsel.
Office managing partner Pedro Siza Vieira said it was a difficult decision and one made solely by local partners, not central management.
He also stressed the firm’s commitment to Portugal, pointing to the recent promotion of managing associate Marcos Sousa Monteiro to counsel.
In a statement Linklaters said: “[It] is not a decision we have taken lightly, but we believe it is necessary given the continuingly challenging market conditions in Portugal and the anticipated slow economic recovery.
“These measures will enable the office to maintain its strength and to continue to develop over the long term. We are committed to offering support to these professionals and hope that they find new opportunities to develop their careers.”
Portugal’s law firms had so far managed to avoid making redundancies. And although one partner at a Portuguese law firm admitted that it “was not part of the country’s tradition to let go of people”, the reaction to the news of the redundancies has been one of understanding, even praise, with speculation that Linklaters gave the associates as much as one year’s severance pay. (Vieira would only comment that the redundancy packages varied according to seniority and length of employment.)
“To do what Linklaters did was a very courageous move: very sad but very honest,” said Francisco Sá Carneiro, founding partner at Campos Ferreira Sá Carneiro & Associados. “We think that the larger firms [in Portugal] will have the same problems, although I’m not sure if they will handle it the same way as Linklaters […] Another way to deal with it is to reduce rates, which will buy the firm some time to see if the market picks up, but I have my doubts.”
Frederico Pereira Coutinho, partner at Cuatrecasas Gonçalves Pereira, also said that the year ahead will be tough. He predicted that his firm would look to cut costs in marketing, but that the worsened economic situation would not affect the firm’s head count.
But Linklaters, as an office focused on high-end M&A and capital markets work, was probably more affected by the downturn than domestic firms, which have a greater proportion of income from less prestigious but more resilient client work.
Since joining the European Economic Community (now the EU) in 1986, Portugal has had the slowest real-GDP growth of any country in Europe. And rising labour costs made the country uncompetitive, allowing it to be overtaken on exports by emerging markets. In March 2010, Portugal’s credit rating was cut from AA to AA- by Fitch ratings agency following concerns about the country’s debt.