Wragges cull: fee-earners pay £3m price of real estate slump
29 September 2008
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The announcement that Wragge & Co is to make 30 fee-earners redundant should hardly come as a surprise. Corporate and real estate – the two sectors that have been most affected by the downturn across the legal market – were together responsible for almost half the firm’s revenue last year.
What is surprising is how long it has taken for the redundancies to happen. Real estate is Wragge & Co’s most important department – accounting for a third of total turnover, 190 lawyers and 30 partners.
The department’s budget will be down by between £3m and £4m this year. Around a fifth of revenue has been dependent on real estate investment, with retail another significant slice. Both those areas have seen their fortunes take a turn for the worse as a result of wider market conditions.
Clients have pushed deals further and further back until it seems they are unlikely to happen at all. At the start of the financial year team leaders were being told to set targets on a quarter-by-quarter basis, but the volatility of the market means they are now looking ahead month-by-month.
The firm tried to put off the inevitable, despite the depth of the crisis. As late as Christmas last year, the real estate department had plans to hire more than 17 associates. In the first few months of this year it was still embarking on a flashy real estate branding campaign in Central London tube stations and the Mipim trade fair.
This redundancy consultation is the first the firm has launched. Perhaps the management wanted to avoid the mistakes of the last recession, when axe-wielding firms were not able to take advantage of the eventual upturn because they had too few lawyers.
The consultation is different from that of other firms because only lawyers and not support staff are in the firing line. A similar consultation at Halliwells has seen both lawyers and their secretaries targeted.
Wragges’ official line is that it is making the cull because lawyers like to be busy and it would be cruel to keep them on without giving them work to do. Secretaries, by contrast, are considered flexible during economic downturns.
This is a ruse. What it’s really about is saving more money. The fee-earners are not bringing in any money because there is not any work, except in specific areas. Fee-earner salaries are several times higher than those of support staff. By cutting 30 fee-earner jobs the firm will eventually save in the region of £3m. That pretty much makes up for the expected fall in real estate income this year.
But not all redundancies will come in real estate. Expectations are that the largest single number will be in that department, but the consultation is being undertaken across the board. Corporate, which is not expected to grow this year, will probably be affected. However, the counter-cyclical dispute resolution and IP departments, both areas in which the firm has good branding, should be safe. Birmingham and London are both being targeted, but the axe is likely to fall more heavily in the former, where the bulk of the firm is based.
With the market in turmoil, the alternatives are somewhat bleak for the unlucky 30. A Birmingham-based recruiter says the options for these candidates “depend upon how flexible they can be on location”. He is already receiving CVs from Wragges lawyers.
“There’s growth in markets like Central Europe, Moscow and Dubai and possibly with smaller firms in rural locations outside of the typical commercial centres nationwide,” the recruiter says.
But what if you have kids in school? Your partner has a job in the Midlands? Or you cannot bear to leave Birmingham – said by some to have more canals than Venice, more parks than Paris and more trees than people?
“There are professional support lawyer opportunities, contentious discipline, business restructuring and insolvency will be very busy – there’ll always be a need for someone from a niche discipline such as IT or pensions,” he says.
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