London lawyers tempted by dollar bonanza

Source: Financial Times

By Jane Croft

London law firms are facing a battle for talented recruits as rival American organisations award large pay increases to their newly qualified lawyers this year — with one paying its London staff in dollars.

Some US law firms have extended the pay rises given to their new lawyers on Wall Street to their London-based counterparts. As a result, freshly qualified British lawyers working in London for US law firms can now earn up to $180,000 (£137,400).

This is far more than the £85,000 that newly qualified lawyers can typically make in the Magic Circle, the cadre of London-headquartered firms that work on the biggest deals and cases.

The US firm Kirkland & Ellis has switched to paying all its London-based staff in US dollars as of July which has had the effect of insulating them from the falling value of the pound. It has also extended the increase in base salaries for its US associates to their London peers: newly qualified associates in the firm’s class of 2015 will receive $180,000.

“Kirkland & Ellis is committed to paying top-of-market compensation to all our lawyers by reference to local markets. We always aim to hire and retain the best legal talent in the market, which we see as critical to our ongoing success,” said Stephen Lucas, a corporate partner, in a statement.

The pay war began in America this year when the US firm Cravath Swaine & Moore upped its rates for first-year US associates from $160,000 to $180,000, causing Wall Street rivals to follow suit. In some cases this was extended to London-based associates.

A newly qualified London-based lawyer at the US firms Davis Polk and Atkin Gump now receives £112,500, but paid in sterling. White & Case raised its starting salary for newly qualified lawyers in London by £15,000 to £90,000 last year but is not planning further increases this year.

By contrast, newly qualified lawyers at the Magic Circle firm Clifford Chance receive £85,000. Freshfields has also increased its rates for newly qualified lawyers from £67,500 plus bonus last year to £85,000 with no bonus this year.

Allen & Overy has a starting salary for associates in London of £78,500, which has not increased this year, but its starting salary for US qualified associates is $180,000, reflecting the longer training period in the US.

American firms have made inroads into the London market by picking up work from financial services as well as from regulatory and investigations work. About 100 US law firms have bases in London and have been expanding their operations there in recent years.

The higher salaries they offer is counterbalanced by a longer-hours working culture, however. Between 2010 and 2014 there was a 29 per cent increase in hours worked at the London offices of US firms, according to a study conducted last year by Citi.

Even so, one recruiter suggested this cultural difference was disappearing. “It used to be people would give a flat ‘no’ when approached to work for US law firms . . . but now lawyers all work long hours,” he said.

Most US firms with a presence in the UK capital have always paid their London partners — very senior lawyers — in dollars as they share in the profits of a global business, even though more junior staff are paid in sterling.

Seamus Hoar, partner at Major, Lindsey & Africa, the world’s largest legal recruiting firm, said US firms were now part of the City landscape to the extent that about 60 per cent of lateral job moves in the UK involved moving from one US firm to another.

Over the past 20 years they had become “a highly credible option for associates”, he said. “It is never easy to hire a partner. Now US firms have a very established presence in the London market . . . it is easier to attract partners.”

Read more of this feature at Financial Times.

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