What an astonishing month it’s been. For most law firms these convulsions of capitalism have resulted in redundancy programmes, questions over the safety of money in client accounts, the realisation that the January partnership tax bill is alarmingly close, and, as we report this week, worries over property exposure – one of the major costs for any law firm.
Not that the downturn has quite caught the biggest legal employers in the City. The largest number of redundancies recorded by our Legal Job Watch page (now at 730 among the top 200 UK firms) come from larger regional practices – and particularly North West firms, with Halliwells and Cobbetts leading the unhappy pack.
One managing partner of a particularly tightly run firm admits that he’s made a handful of redundancies each year since 2005, the vast majority of which have been non-fee-earners. Another London managing partner confides that he prefers to guarantee employment for non-fee-earners, since they are less likely to find jobs elsewhere in the City, while the lawyers have transferable skills.
I spoke to nine City managing and senior partners in the upper mid-market last week, and their predictions ranged from a drop in turnover of anything between 5 and 20 per cent. All of those firms are well-managed and deliver strong profit per equity partner (PEP) figures, but the jitters are everywhere. In every case – and these are firms with variable mixes of corporate, real estate and litigation – turnover was down by only around 5 per cent at the six-month stage. At the moment this would translate to a PEP drop of around 10 per cent.
This won’t be replicated across the top 200 firms. There are persistent rumours that small to mid-sized firms are facing 75 per cent PEP drops. Outside the top 50, forced consolidation is on its way. We’ll be reporting on that in the coming weeks.
Meanwhile, Linklaters, the star of the downturn and the best-run magic circle firm, is widely assumed to be heading for a PEP increase. With popular revulsion against City pay growing, that will be a PR job to watch.