London proves tough nut to crack as Halliwells culls lawyers

So Halliwells is the latest UK firm to respond to the credit crunch by laying off staff, following in the footsteps of Newcastle-based Dickinson Dees, which let 17 people go when major client Northern Rock’s fortunes plummeted south.

But the planned redundancies in the corporate department of Halliwells’ London office are not tied to the fate of one such prominent client, but of failing to break into the tough London market – compounded by current economic uncertainty.

About eight lawyers and secretaries are expected to lose their jobs as a result of the department falling short of budget. This is a further blow to the group given that only last month the office’s head of corporate moved on, leaving the team without a chief.

Perhaps Halliwells thought it could replicate its success in the North. Following the 2006 merger with James Chapman, and a double whammy of raids on the Sheffield offices of DLA Piper in 2007, it took on partner Neil Thompson in a bid to launch a corporate offering in the city of steel last year and then it snared a 10-lawyer healthcare insurance team led by Andrew Peel at the beginning of 2008.

However, the situation up in the firm’s heartlands is always going to be different from that in the City. “Sheffield is always driven by corporate clients rather than by intermediary referrals,” says Thompson. “A corporate has its own reason for buying and selling rather than just the cost of borrowing,” he adds.

Launching in London is a massive commitment, which other regional firms have grappled with and had mixed success in. There have been positive stories: Addleshaw Goddard, DLA Piper, Eversheds and Pinsent Masons spring to mind. These firms have managed to capitalise on their regional bases to offer reduced chargeout rates and more senior lawyers to their clients while committing serious resources to increasing their exposure and their profile in the City.

These firms have managed to play to the strengths of having multiple sites. According to Addleshaws head of real estate Michael Reevey, clients with a nationwide spread do not want a one-size-fits-all approach. As a result, his firm offers advice tailored to the demands of the same client based in Leeds, Manchester and London.

At the same time, having a presence outside London allows firms to take a long-term view, keeping lawyers on during quieter times by moving individuals and work around between offices.

But London is seen as an absolute priority for these firms. Eversheds is investing £11.6m in new über-eco offices at One Wood Street, while Addleshaws is looking to nudge eastwards into the Milton Gate complex. Halliwells, on the other hand, decided to relaunch last year within Manchester.

A firm does not need to be in London in order to grow. Pannone has decided to stay put in a single site in Manchester and its turnover has reaped the rewards of staying close to its client base. Nevertheless, this is born out of tough experience. Pannone set up in the City in the early 1990s but found that Manchester was effectively subsidising London so the capital’s office was quickly slashed. Other firms have also been and gone. Cardiff-based firm Morgan Cole had offices in Fleet Street, but promptly retreated with its tail between its legs in favour of the bright lights of Croydon.

In order to make it, a firm needs to go the whole hog, committing intensive resources to the recruitment process while increasing its City profile among clients. Recruitment consultants often have trouble convincing City high-flyers to work for what might be seen as little more than an outpost of a national or regional firm.

The firm denies that the cull is a sign that it is downsizing in London. Managing partner Ian Austin claims that “growth in London will continue”. But Halliwells faces a dilemma: unless resources are committed to bringing in the best people in the City, it will always be seen as just a shopfront. But given the instability of the London market, it could also prove to be an insatiable beast that bites the hand that feeds it.