In-house counsel have railed against escalating legal fees, claiming that firms do not care about clients having to pay hugely inflated rates.
Average partner hourly rates at magic circle firms have risen by 67 per cent, from £375 to £625 during the past four years, with the cost for specialist tax or regulatory advice coming in at around £700 per hour. At national firms partner rates have spiralled by 89 per cent, from £185 to £350 an hour, according to a study carried out by Legal Budgets in conjunction with The Lawyer.
The senior counsel at one FTSE100 company said: “The magic circle’s been so busy with M&A that they can charge £650-£700. If you don’t pay it they don’t care, because someone else will.”
Newly qualified associates at the magic circle charge £235 an hour compared with £175 four years ago, and hourly rates for five year-PQE associates have risen by 53 per cent, from £245 to £375.
“At the lower end you notice it: it’s one thing paying for specialist tax advice, but £200 an hour for someone to do filing hurts,” added the counsel.
For John Kitching, general counsel at HgCapital, the increases have highlighted the need for in-house counsel to project manage everything they do and focus the questions they need advice on before turning to external advisers.”I find it amazing that firms can increase hourly rates so much more than inflation,” he said.
However, George Scott, legal counsel for Scottish Re, said he believes partners do offer good value for money.
“I’d prefer to pay £650 for an hour of quality, honed advice from a partner than pay for three hours with an associate who’s on £350 and isn’t clear on the issues,” said Scott. “You get what you pay for.”
Big firm rip-off
There are occasions when the resources (and therefore the fees) of large firms are justified, such as on large M&A and banking transactions. Their model is unsustainable, though, when it comes to clients’ every day needs, such as commercial agreements, IP, most dispute resolution, employment etc.
Boutique firms are much better placed to service that market. Most of their lawyers are very experienced, and have previously spent years at large firms, so are no less skilled than the partners there.
Boutique firms lack the overheads of mega-offices and armies of highly paid assistants, so can charge a fraction of their large firm counterparts. In fact, the partner rate at a boutique firm is usually around the magic circle NQ rate quoted in the article!
And the experience of boutique firm lawyers often enables them to provide a faster, more commercial and more personal service than that provided by the large firms.
Finally, how many clients pay their top 500 staff £1m a year like the magic circle firms do? Not many.
disasterous
Such high rates are defeating the object of a sound democratic society. Yes, willing to pay good money for sound advice but such rates are detering many from taking advice when necessary. They are putting doubt into the minds of the public as to the integrity of the legal field.
Revealed: hourly rates rocket by 67 per cent
Reminds me a bit of Tokyo and New York at the end of the eighties. They thought they were masters of the universe then as well. Hope they aren’t buying high priced real estate…….