Partner rates skyrocket at top firms despite economic gloom
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Discounts dwindle as magic circle rates soar to over £700; rises across the board
Mark Dawkins
Magic circle partner rates have bounced back to levels not seen since before the recession, according to an annual survey of hourly rates.
Research by leading costs lawyer Jim Diamond on behalf of The Lawyer claims that magic circle partners are again charging as much £725 per hour.
Last year was reportedly the first in more than a decade in which fees charged by the UK’s elite firms fell, when they were reported to be charging an average hourly fee, including discounts, of £450.
While this year’s figures are an average of the firms’ headline rates and do not include reduced rates, Diamond claims firms are becoming increasingly reluctant to negotiate significant fee reductions.
Even magic circle five year-PQE associates now charge an average of £450-£550, a top tariff increase of 38 per cent compared with 2008. Diamond has accused in-house counsel of talking tough on driving down costs but continuing to pay “astounding” fees.
The research also reveals that 2010 was the first year in which US firms in London broke through the £600 barrier. US firms in the City have traditionally opted for a business model of keeping hourly fees down and productivity high, but the latest figures suggest a diminishing workload has brought this system under scrutiny and forced firms to push up their headline rates.
The London-based general counsel at one Nasdaq-listed company believes the trend also indicates a flight to quality.
“You could ask whether any lawyer is worth £600 an hour, but it’s all market-driven,” he said. “In many ways US firms are as good as the magic circle, if not better. In some areas, such as high-yield, no UK firms can compete with them.”
Another surprise finding is that, while the bottom end of City partners’ average hourly rates outside the magic circle have remained static at £375, some are now charging an all-time high of £640 - a figure confirmed to The Lawyer by several in-house counsel.
Fees at national firms have remained largely stable, with partners charging between £325 and £350, and five-year associates between £250 and £300. The 2009 partner average was £325 and £250 for associates.
Simmons & Simmons managing partner Mark Dawkins claims that, while magic circle headline rates remain high, in some practice areas they are continuing to drop prices
in a bid to undercut their non-magic circle rivals. He also believes there is no sign of clients easing their demands.
“I haven’t seen anything to suggest clients aren’t as budget-conscious now as they were last year,” he said. “When it comes to fees, clients want a combination of certainty, transparency and value.”
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Readers' comments (15)
Anonymous | 20-Sep-2010 1:04 pm
This all depends on the practice area. In finance rates have been on a steady downward spiral since 2008. At the back end of the boom the magic circle could get away with charging £750. Now you’ll be lucky to get £550.
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Mark Dawkins' Hat | 20-Sep-2010 2:50 pm
It looks to me like the City firms have learnt nothing from the recession. If they think things have gone back to normal they're staring oblivion in the face.
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Poundstretcher | 20-Sep-2010 3:16 pm
Surely firms are going to charge whatever they can get away with? If GCs are stupid enough to pay it then that's they're problem. If they're not they'll go somewhere else - there's enough competition out there ...
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Anonymous | 20-Sep-2010 4:43 pm
I'd like to hear all from all those in-house lawyeers who talked about getting the whip hand when the recession struck. Oh, is there a big silence?
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Pope Benedict | 20-Sep-2010 4:48 pm
I think this just goes to show how resilient big law firms really are
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Spenser Poultney | 20-Sep-2010 7:20 pm
At least you know the rate up-front.
How about doubling the rate between order and assessment and lying about the increase?
http://www.lcs-test.co.uk/courts.htm
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Scep Tick | 21-Sep-2010 10:01 am
Or how much the market is stitched up, an oligopoly along the lines of the Premier League.
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Anonymous | 21-Sep-2010 11:56 am
If you've got rid of as many staff as the magic circle over the last two years and you want to keep up profits then you have to charge these amounts.
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Parsley the Lion | 21-Sep-2010 1:34 pm
The arguments about a shift in power from law firms to in-house were never based on partner or even senior-associate rates. Their work is safe and in-house counsel don't seem to mind paying for real added value. It's the junior associates' rates and the leverage that are both under pressure. And it is that bottom third of the law firm pyramid that helped create the boom-time profits. If junior associate rates are increasing as well, then yeah, nothing has changed after all. More fool the in-house counsel.
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anon | 21-Sep-2010 1:35 pm
an oligopoly? last I heard, there was nothing to stop a client instructing any other law firm they want.
Truth is, just as no one was ever sacked for buying IBM, big firms are reassuringly expensive and no one wants to risk a disaster for the sake of saving a few grand and instructing an unknown brand.
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