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There has been plenty of anecdotal evidence of the effects of the credit crunch on the legal market, but little in the way of hard facts.
The news that the number of graduate vacancies is expected to rise for a fifth consecutive year has not had widespread coverage, but it should have. This is the first data to study the robustness of the UK legal market.
Rise in vacancies
The Association of Graduate Recr-uiters' (AGR) Graduate Recruitment Survey 2008 winter review - held to be the definitive study of its members' recruitment policies - found that last year's 12.7 per cent increase in vacancies at AGR members is expected to be topped in 2008. In fact, it is predicted that graduate vacancies in 2008 will jump by a very healthy 16.4 per cent - the highest percentage growth in a decade.
AGR chief executive Carl Gilleard admits he was slightly surprised by the findings because of recent media headlines, which continue to paint a gloomy picture of economic prospects in 2008.
Nonetheless Gilleard argues that we are a long way from vacancy numbers beginning to wane. "I can't see it going into a negative situation where we'll see a fall in vacancies. I've not picked up any hard evidence that employers are significantly adjusting their graduate recruitment targets," he says.
The survey was conducted among 217 top blue-chip employers, which together employed 26,575 graduates in 2007. Law firms were well represented, with Allen & Overy (A&O), Ashurst, Baker & McKenzie, Berwin Leighton Paisner, Bond Pearce, CMS Cameron McKenna, Dechert, DLA Piper, Eversheds, Irwin Mitchell, Jones Day, Linklaters, Mayer Brown, Nabarro, Pinsent Masons, Reed Smith, Richards Butler, Simmons & Simmons, SJ Berwin, Slaughter and May, TLT Solicitors and Wragge & Co all contributing.
Camerons' graduate recruitment partner Simon Pilcher echoes Gilleard's views and says he too was taken aback by the conclusions of the AGR research. "I would've thought that in the wider market recruiters would be more pessimistic," concedes Pilcher.
Meanwhile, Matthew Keats, graduate recruitment partner at Linklaters, says: "From our point of view it's business as usual and we don't see a downturn in the economy having a significant impact on our recruitment policies."
Linklaters plans to hire between 130 and 140 trainees in the current recruitment round, which is roughly the same as in previous years.
What's more, Keats predicts a significant rise in the number of students applying for vacation schemes and training contracts. "A lot of students will look towards the safe haven of law in a way they might not have done when markets were more bullish, given our commitment to graduate recruitment as the key element of our long-term resourcing strategy," he says.
The fast moving consumer goods (FMCG) and IT sectors are leading the upward trend in available vacancies. The FMCG sector is expecting to recruit 53.7 per cent more people in 2008 than it did last year, while in IT the number of vacancies is predicted to shoot up by 41.9 per cent. However, the picture is less rosy in the legal and accountancy sectors, which expect vacancies levels to rise by a very modest 1.4 per cent and 2.4 per cent respectively.
Meanwhile, investment banks and fund managers, the most prolific graduate recruiters behind accountants, anticipate a 28.2 per cent rise in graduate jobs. The only sectors expecting a dip in positions are chemical-pharmaceutical and insurance.
AGR members recruiting in accountancy and professional services are considerably more optimistic with regard to recruiting challenges in 2008 - with 23 per cent expecting a shortfall - than they were in the previous year when 58 per cent felt a shortfall was likely.
The legal sector is unusual, however, because it works on a different recruitment cycle. Indeed, the vast majority of City firms filled their trainee solicitor vacancies for autumn 2008 and spring 2009 two years ago and are now recruiting for 2010-11, so it is already too late, claims Pilcher - adding that to recruit on the basis of short-term economic trends is "not very sensible".
Baker & McKenzie's graduate recruitment partner Vincent Keaveny concurs. "Law firms have to look beyond the short term," he says. "Even if there is a very bad recession we have to be sensible. We don't anticipate any sort of kneejerk reaction and the same will apply to our retention figures for trainees who are due to qualify this year."
Money, money, money
Money, of course, is always a key factor in attracting talent at all levels of business. The survey found that trainee solicitor pay has finally caught up with the graduate salaries on offer at investment banks. The median starting salary in 2007 for trainees and their peers in investment banks or fund managers was £35,500.
Many of the large City law firms, however, pay their first-year trainees above the AGR average. As highlighted in the Lawyer2B.com salary index, the magic circle firms - A&O, Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters - pay their new joiners £36,200, £35,700, £38,000 and £36,000 respectively.
US firms, including Bingham McCutchen, Cleary Gottlieb Steen & Hamilton and Debevoise & Plimpton pay their first-year trainees £40,000, while those joining Weil Gotshal & Manges and White & Case will receive starting salaries of £41,000.
The average trainee solicitor salary is expected to rise by 2.8 per cent in 2008, with investment banking and fund manager salaries predicted to remain static.
Keaveny agrees with this statistic and also predicts that there is unlikely to be much upward pressure on trainee solicitor salaries after many firms dished out double-digit pay rises last summer.
This is the first time law firms have topped the AGR survey, albeit jointly. Compared with the figures published in the previous winter review, these salaries represent a considerable increase for law firms, but a slight drop (from £36,000) for City bankers or fund managers.
Pilcher welcomes this finding, saying: "The fact that law firms are paying on a par with the banks is a good thing. It will make us more competitive."
This view is echoed by Freshfields' new graduate recruitment partner Mark Rawlinson. "It's pleasing that we're now on a par with the investment banks because to some extent we're fishing in the same pool," he says.
But Rawlinson argues it is too early to predict what will happen to trainee salaries this year. "You'd imagine that given current economic and market factors, upward pressure on salaries will abate somewhat," he says.
And many will argue that this is how it should be. Rising salaries are funded by rising fees. And many clients are not prepared to fund the increases.
Legal & General group head of legal Geoffrey Timms eloquently expressed this dichotomy recently at The Lawyer's Managing Your Relationship With Outside Counsel conference. "Fees inexorably rise. They rise in part because salary levels have to rise to remain competitive. The lawyers have to work longer hours. The majority of lawyers are less satisfied than before and most clients are less satisfied with the level of fees they get. There are no easy answers, but it's one question that will continually face us."