In-house
Interview
Wellcome Trust
general counsel
John Stewart 18
THE LAWYER
City Norton Rose holds its own in the corporate bear pit 13
Feature Industry leaders predict what 2009 has in store 16
Special Report Property/US Firms in London 23/25
VOL 23 ISSUE 13 WWW.THELAWYER.COM 30 MARCH 2009 £2.95
The first signs of recovery?
No to meltdown: firms predict
revival in 18 months and commit to
traditional associate gearing model
By The Lawyer staff
WITH just five weeks to go
until the end of the financial
year, major City law firms
are preparing their staff for
financials at 2003 levels, but
are uniformly predicting a
recovery in 18 months.
The Lawyer interviewed
managing and senior partners
from leading City firms.
All are envisaging dips in
revenues and/or profits this
year and next, particularly as
costs continue to rise, despite
pay freezes. However, all
predict a medium-term
recovery, suggesting that
business confidence is higher
than the raft of redundancies
would initially suggest.
“It still seems as though we
have a long way to go before
THIS WEEK
we see a return to normal levels
of transactional activity,
and of course we don’t
know what ‘normality’ will
look like,” said Freshfields
Bruckhaus Deringer chief
executive Ted Burke. “But
there are enough positive
signs out there to suggest that
we have at least seen the end
of the beginning.”
“It became rather cool to
be apocalyptic,” said Denton
Wilde Sapte chief executive
Howard Morris. “Everyone’s
terrified of being ridiculed for
talking about green shoots.
The universe has shrunk, but
within that universe there are
some bright stars.”
Nabarro senior partner
Simon Johnston said:
“Inherently I’m an optimist.
I don’t think it will be that
FIVE-YEAR PARTNER/ASSOCIATE RATIOS COMPARED
2008
0.0
0.2
0.4
0.6
0.8
1.0
Total partners
5,357
Total lawyers
23,890
2003
Total partners
6,619
Withers goes international
Firm opens first offshore
outpost in the British
Virgin Islands 3
Burke: good vibrations
significant a change. Yes,
there is a new morality in
the City, and that will run
across into law firms. It will
pretty much be the same
shape of the industry with a
little bit more realism.
“I wouldn’t say our shape
is perfect right now, but
with a little bit of an
increase in activity we’d be
Total lawyers
22,166
Top 20 firms in 2003 and 2008 Source: The Lawyer UK 200
Geffen: clients want seniors
back up to 100 per cent.”
According to The Lawyer
UK 200 Annual Report
2008, the partner-associate
ratio across the top 20 is only
slightly higher than five years
ago (see chart). There had
been speculation that this
gearing model would collapse,
but all the major law
firms are still wedded to the
# # #
SRA stung by criticism
Call for wholesale overhaul of
how corporate firms are
regulated 4
pyramid structure, which
shores up associate career
opportunities.
“We’re a little puzzled by
the intensity of discussion
over leverage ratio,” said
Lovells senior partner John
Young. “A lot of it comes
from the US and is based on
this concept of law firms
abusing the system and
that you throw jobs to vast
amounts of associates. It
doesn’t strike me that clients
are pushing against it.”
“We’re committed to the
pyramid stucture for the
next four years,” said Travers
Smith managing partner
Chris Carroll. “Deciding on
changing it in five years is a
pretty brave thing to do – in
fact, it’s barking mad.”
Ashurst senior partner
Charlie Geffen said: “It’s
clear that at the moment
clients are demanding a lot
of senior time, but it isn’t
always going to be like this.”
Morris: green shoots Carroll: status quo
Kavanagh leaves O’Melveny
Litigation head says
departures will not harm
disputes capability 5
One senior partner at a
City firm said: “In the old
world there were loads of
young lawyers producing
boring bits of paper that
made us loads of profit. We
grossly overcharged for
associates and we grossly
undercharged for senior
time. The struggle is to get
through this period of low
gearing, and to do that you
look at senior resource. The
partners working hard now
is where the real value of the
firm is. The partners not
working too hard can be
replaced by juniors – that’s
the brutal truth.”
Magic circle firms’ deal
factories have seen a
disproportionate number of
redundancies, with clients
no longer requiring highlevel
and high-volume work.
A senior magic circle
partner told The Lawyer:
“Most of the magic circle
firms have been reducing the
number of associates anyway.
To the extent that we’re
also reducing partner numbers,
that’s really dealt with
the gearing issue. Clients
want senior advisers on
these deals so less associates
are required. I think the ratio
is likely to go from 4.5:1 to
4:1 in banking for the short
term, but it won’t change
much more than that.”
Herbert Smith managing
partner David Willis said:
“There’s a feeling of spring
around.”
#For more discussion on
paradigm shifts, see the
feature on page 16. For more
managing partner comments,
log on to TheLawyer.com.
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