A&O becomes second magic circle firm to make layoffs

Allen & Overy (A&O) has emerged as the second magic circle firm to announce a redundancy consultation, with 10 lawyers in its Hong Kong office expected to lose their jobs (TheLawyer.com, 16 January).

The news comes just over a week after Clifford Chance admitted that up to 80 of its London lawyers would be made redundant (TheLawyer.com, 8 January).

With total redundancies among UK law firms now sitting well above the 2,000 mark, the question since the end of last year has been when the magic circle would join the club rather than if. The even bigger question was which firm would make the move first.

Clifford Chance has now openly admitted that it has a problem – how could it not when 60 per cent of its ­revenue is derived from the financial services sector? While A&O’s layoffs are on a smaller scale than Clifford Chance’s, the firm clearly has some problems of its own.

Like management teams in the rest of the magic circle, A&O ­senior partner David Morley has been reluctant to discuss redundancies. While he was willing to engage with The Lawyer’s questions, ultimately his responses were summed up in a comment used to field all press enquiries.

He said: “What others are doing in the market doesn’t change anything for us. We continue, as before, to keep things under close review as current market conditions remain exceptionally difficult.

“Like any business, we cannot rule out the possibility of having to make ­targeted redundancies in particular practice groups or offices if there is a sustained downturn or if there are exceptional business reasons.”

Internally, staff were told via an intranet posting that the firm could not rule out layoffs in London. The situation is similar at the rest of the magic circle, although firms are reluctant to discuss the matter.

Linklaters, which has been kept busy over the past few months with roles on the administrations of Waterford ­Wedgwood, Woolworths and, most ­significantly, Lehman Brothers, would not answer telephone calls or emails regarding the issue of redundancies – not even to say “no comment”.

Management at Freshfields Bruckhaus Deringer, although amenable to a conversation, would not give any on-the-record comment about layoffs in general, much less about layoffs in ­relation to the firm itself.

But why are these firms so loth to discuss redundancy at a time when the recession is hitting practically all areas of the economy and jobs are being cut on a daily basis? Surely with clients going bust and workloads drying up it makes sound business sense to cut back on staffing costs, no matter how difficult those cuts may be on a personal level?

According to one magic circle partner, while law firms are businesses and need to be run as such, in reality they are managed in a different way to major corporations in other sectors.

“The relationship between law firms and their employees is a bit different – we’re more traditional, more conservative,” the partner said. “If you work at a bank and the boom times end, they’ll fire an entire department. Part of
the risk-reward for that is that you make more money but there’s less job ­security.

“At a law firm, part of the bargain is that there’s more job security. You can’t have a job if there’s nothing doing, which is why law firms rely on up or out.”
While Clifford Chance has clearly stepped away from this level of conservatism, partners at the firm said senior management had agonised for weeks over how to handle making the redundancies public. The main concern was that it would be reported negatively in the press.

In reality Clifford Chance has, as one reader of TheLawyer.com commented, taken the “adult approach”. Redundancies are certainly bad news – for those left behind as well as the people losing their jobs – but in times of financial ­trouble they are virtually unavoidable.

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