City of London: Salary war
Last year was a record one for partner hires by City law firms, legal recruitment consultants have reported.
Edwards Gibson said the “legal boom” had triggered an associate salary war, but working from home had taken its toll on mental health and engagement “with many complaining of dissatisfaction and burnout”.
The recruiters said 2021 saw a total of 473 announced partner moves in London – a 26% increase on the previous year. Last year’s total was 7% above the five-year average of 443 and 9% above the 10-year average of 433.
American giant Kirkland & Ellis led the way in terms of total hires in London last year, with 15, followed by White & Case with 11 and Greenberg Traurig and Addleshaw Goddard, both with 10.
Looking only at lateral hires, or partner to partner moves in London, Greenberg Traurig and White & Case shared first place with eight, followed by five firms with seven − Addleshaw Goddard, DLA Piper, Fladgate, McDermott Will & Emery and Taylor Wessing.
However, Edwards Gibson said it only recorded hires by law firms with conventional partnership or corporate structures, meaning that consultant-led firms such as Keystone Law and gunnercooke were not included.
“The difficulties in confirming a given lawyer’s location at these entities make like-for-like comparisons with conventional law firms particularly difficult.
“However, on a rough reckoning, Keystone hired 30 and gunnercooke hired 16 relevant partners – if correct, this would make them the highest and second-highest partner recruiters in London in 2021.”
A gunnercooke spokeswoman said the firm had actually brought in 24 partners in London last year.
The consultants said the top three law firms in terms of attrition rates from partner to partners moves were Kirkland & Ellis with 11, White & Case with 10 and, “unsurprisingly in view of its imminent plans to list on the London stock exchange”, Mishcon de Reya with nine.
Female partners made up 28% of moves and in-house lawyers moving to law firms accounted for 4%.
The researchers said that on both sides of the Atlantic, “the Covid-induced lockdown year of 2020, and the subsequent economic bounce-back through 2021, have been kind to commercial law firms”.
They went on: “When the economy roared back to life, aided by unprecedented government largess and unbridled optimism following successful vaccine roll-outs, investor animal spirits took over.
“Since then, law firm deal teams have been flat out advising on corporate M&A and financings.
“Record revenue and profitability have provided law firms with the means and confidence to invest in new partner hires, so unsurprisingly 2021 was, in real terms, a record year for law firm partner recruitment.”
This was continuing and, “with few exceptions”, partners in almost every practice area, in every class of commercial law firm, need additional associate/fee-earner support to service their practice, the report said.
However, the “sustained work levels combined with the new isolation of working on a screen from home” appeared to be “taking a toll” on associate mental health.
“Law firms have responded, as they have since the dot-com bubble, with double-digit pay rises and generous bonus payments triggering an associate salary war.”
Although the “tsunami of work” made increased salaries “sustainable”, recruiters warned that salary wars did not “tend to end well for associates, and more importantly for law firm management they have always been a portent of a market correction”.
With partial lockdowns being ordered across Europe to cope with Omicron, consultants warned that sharp rises in inflation and unprecedented government borrowing might limit the scope for “additional stimulus” in the event of a downturn.
“In that situation, law firms will doubtless hope to continue to defy gravity by benefiting from their inherently well-hedged business models.”