Why it's good that the Yanks are coming
22 April 1997
The news that US law firms are looking to double the office space they occupy in the City of London this year raises the question of whether this American invasion should be welcomed or feared.
Some will no doubt argue that charity begins at home, and that we should be protecting our fellow professionals, not only out of self-interest, but also to reflect the wider responsibilities assumed by English firms. I would hope that the contrary arguments would prevail.
Some 9,000 fee earners are employed by the 20 largest law firms here, accounting for nearly 10 per cent of the total market for legal services in this country. Their skills are transaction-related and they do business throughout the developed world.
English law is now the preferred choice for a wide range of international transactions. City firms have thrived on the expansion of London as it has become a centre for European currency markets, a base for syndicated international loans, and the hub of the capital-raising markets in the City.
Overseas branches of the main UK firms have enabled them to develop specialist skills in project finance and in shipping and insurance, which have served to strengthen the position of middle-ranking London firms.
In Europe, all of the top 10 law firms are UK-based. In global terms, 10 of the top 40 law firms are English, but 24 are US. London and New York are the giants of international legal advice and the battle is now joined for dominance in global markets where project finance and capital-raising skills need to be combined to service world class businesses.
Given the strength of the City of London over the decade since the Big Bang, it could be argued that it is surprising that the US invasion has not happened earlier.
Many of the biggest names in the London market are US based - Morgan Stanley, Salomon Brothers and Lehman Brothers, to name but a few. Their presence here has fuelled a trend whereby any international bank with global ambitions must have a significant presence in London.
There are in fact more US banks here than in New York, and perhaps more surprisingly, there are also more Japanese banks here than there are in Tokyo. They are all accessing the fast-growing international markets and they all require quick access to sophisticated professional advice - often 24-hours-a-day.
So, the market is big and growing, it is global, and it needs to be serviced by sizeable legal teams capable of, for example, handling a New York listing out of the London office as readily as out of the New York branch. Or, to look at it in reverse, for US firms to have the same capability in London as they have back home.
To do this they are recruiting English lawyers in large numbers. The employment benefits are here. The added value is here. And the tax revenues are earned here. All of which is good for the London economy, even if, ultimately, some of the profits derived from the activity are repatriated to the US.
Just as we had a Big Bang in the securities markets, we are about to experience a big bang in the legal markets, and ownership does not matter. Having US expertise in London adds to the capital's overall appeal. It creates career opportunities for ambitious trainees, and it encourages international business to cluster in London knowing that the full range of competing skills are available close at hand.
Moreover, competition between firms is healthy for the sustained success of their business. It produces value for money for the client, encourages innovation by countering complacency, and it works to prevent erosion of legal skills by seepage into the consultancy and accountancy professions, which are eager to pick at the margins of mainstream legal activity.
Change is always uncomfortable, but it can be managed. It can be dealt with in a restrictive way, which drives new business elsewhere, or it can be handled constructively by embracing the concept of open markets and free competition - which can only benefit London's pre-eminence in the financial services sphere.
So, to the Law Society I say: "Embrace the invader." In the long term it will bring about welcome change.
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