Dead end

With the economy in a downturn, trainees and newly-qualifieds are often the hardest hit, with law firms simply unable to find enough work to keep them on. Jennifer Currie reports on the shrinking job market and asks what you should do if you’re affected

Hard times have fallen upon the legal profession. Barely a week goes by without fresh reports of partner redundancies, slipping profits, foreign office closures or similar cost-cutting measures. Lawyers appear to be watching their wallets like January slimmers watch their calorie intakes. The bad news is that when law firms want to lose weight, they tend to shed junior lawyers first.

“There’s no doubt that the market is tight at present,” admits Bernard George, director of training at Dechert. “That probably hits newly-qualifieds harder than most. A firm that doesn’t have quite enough work has few options. One is to make people redundant, which is painful and costly; another is to look with a cold eye upon its qualifying trainees and decide which are the ones they really want for the long term.

“At Dechert we have the same pressures as everyone else, but we’re proud that we managed to keep on all but one of our qualifying trainees in 2002. That was a great result, I think. But, of course, the knock-on effect was that we scaled back on hiring newly-qualifieds who were leaving other firms.”

A heady mix of anecdotal evidence and hard fact has led to a bewildering amount of speculation about which firm will be next to wield the axe. Already confirmed this year is that Berwin Leighton Paisner is not offering permanent positions to any of its March qualifiers, while Eversheds has admitted that it is retaining only two newly qualified solicitors out of seven in its London office. Magic circle firms are not recession-proof and one in particular is heavily rumoured to have been slashing its qualifying intake by 25 per cent.

Hugh Crisp, the partner in charge of graduate recruitment at Freshfields Bruckhaus Deringer, says several firms are thought to be getting rid of some trainees upon qualification. “Others, like us, have been keeping up our record of retaining trainees,” he says. “Over the last three years, we’ve offered jobs to 256 out of the 258 trainees qualifying with us, and only nine people have chosen to leave us on qualification.”

Spring may have almost sprung but managing partners are still feeling gloomy about economic prospects for the next business year.

According to The Lawyer’s business confidence survey of the top 100 firms, only 5 per cent believe that things will pick up during the next six months, while 40 per cent think that the economic climate will get worse, compared with 23 per cent last quarter.

Yet it’s not all doom and gloom. Firms do not expect their growth prospects to change much and most expect to see average fee income increase by 5 per cent. Added to that is the happy fact that only 12 per cent of managing partners think they will be forced to slash staff during the next six months, with the majority (45 per cent) predicting that staffing levels will remain about the same. Lawyers in large City firms will be more at risk of job cuts than their regional counterparts.

Meanwhile, the major issues keeping managing partners awake are fears about what will happen if the economic downturn continues, fee pressures from clients, increased competition for work and late payment by clients.

Areas expected to blossom in the next quarter are commercial litigation, insolvency and human resources work, while corporate finance, commercial property, IT/IP and international work will all remain subdued.

While most firms are happy to release detailed information about their trainee retention rates, firms such as Clifford Chance, Linklaters and Lovells have all refused to do so. Instead they claim that the annual percentage should be upwards of 80 per cent. Meanwhile, experts predict that take-on rates in mid-sized firms are expected to sag to around 60 or 70 per cent. Although the annual retention rates remain fairly strong, there are signs that this year’s March intake could be significantly lower than expected in some places.

Crisp adds: “The market is very tough at the moment for trainees who don’t get kept on at qualification. People don’t seem to be moving jobs. Anyone who’s not been kept on should keep in touch with law school or university colleagues, who may be able to provide useful tip-offs when suitable vacancies arise.”

Legal recruitment consultants agree that the market is not a happy place to qualify into at the moment. “It’s fairly similar to the way it was in the early ྖs,” says Debbie Adkins, a recruitment consultant at Garrett McCarroll Knowles (GMK). “Possibly not as bleak, but [many] firms aren’t keeping their trainees on when they qualify, which means there are an awful lot of newly-qualifieds out there looking for the same jobs. It’s not a buyer’s market.”

Adkins has recently noticed an increase in the number of newly qualified solicitors looking for work outside London, a trend that will put greater pressure on the number of positions available in the regions. “In some ways there’s been a natural correction in the market,” she adds. “Firms recruited very heavily a few years ago and now they’re being extra cautious. A lot of firms are telling us they can’t keep people on, no matter how good they are.”

Scott Gibson, the manager of re-cruitment consultants Hughes-Castell, says the current state of the market is a significant issue for trainees to consider as they approach qualification. “A few years ago, when the market was going up and up, the salaries of junior lawyers increased in a way they have never increased before – in some cases from 33,000 to 46,000,” he explains. “There’s less work now, but the high salaries now mean a newly qualified solicitor costs a lot more.

“Between four and five years ago, a newly qualified solicitor was earning half of what a five-year-qualified solicitor did. Now they earn three-quarters of what a five-year-qualified solicitor does, and they’re not asked to do an awful lot more. So when firms want to hire someone, they ask themselves, ‘is a junior lawyer really worth as much as they’re paid, when we can get someone with three years experience for just a little bit more money?'”

Future trainees have also been identified as the targets of cost-cutting measures in the last six months, with firms such as KLegal, Linklaters and Norton Rose all offering cash packages to students if they agree to defer the start dates of their training contracts for a year.

Charlie Jacobs, a Linklaters corporate partner who is also in charge of graduate recruitment, says the firm’s decision to defer 30 future trainees over two years was made simply because it did not have enough work to keep the trainees constructively busy. “Our level of business has dropped and we’ll not be able to give the trainees the best practical experience on deals,” he admits. “[We feel] they would have a better level of training if they come back to us when the market picks up. We’re simply being honest and open with our employees.”

‘Our level of business has dropped and we’ll not be able to give the trainees the best practical experience on deals’
Charlie Jacobs, Linklaters

When managing partner of KLegal Nick Holt announced his firm’s plans for a widespread deferral package last summer, he insisted that other firms were not being quite as transparent and were already “quietly deferring” their trainees.

Yet George at Dechert predicts that any trainee cull will not be as dramatic as in previous years, when both trainees and assistants faced the chop. “In the recession of the early ྖs, many firms cut back. Then things picked up and the ones who had survived found they were a scarce and much-prized commodity,” he recalls. “The magazines filled up with job adverts. They could take their pick. And of course their salaries went up like space rockets.

“The canny firms will remember this and will keep on everyone they can now. Certainly, that’s what we’ll be doing at Dechert.”

With so many rumours flying around, it’s difficult to know what or who to believe. Nadia Akhtar, current chair of the Trainee Solicitors’ Group, says she is not convinced by the gloomy forecasts and stories of slipping retention rates. “I’ve not heard of anyone I know not being kept on. You have to remember that people move on for personal reasons – because they want to go to a bigger or smaller firm, or even in-house. There are many reasons why people leave law firms – not just because the firm can’t afford to keep them on,” Akhtar says.

Looking at the bigger picture, it is impossible to predict when the economy will pick up, but trainee lawyers are advised to “manage their ex-pectations” until it does. “As well as working hard, people should be open in terms of the area they want to qualify into,” says Adkins. “It’s not really a good time to be picky.”

“My advice is to do what you can to be kept on, which may mean showing that extra bit of keenness, and can also mean being pragmatic,” says George. “You also need to think how your CV will look. It may be unfair, but if you leave on qualification, you can have problems. Future employers may suspect that you didn’t make the grade, even if the real reason was that you chose to leave to do different work. Second, if you stay, you can always decide to move later.

“But if you move you will really have to stick it out at your next firm for at least a couple of years. Otherwise you end up with a frog CV (always hopping about), which really puts employers off.”

While it seems that trainees are best advised to keep their heads down and work hard until the clouds lift, George urges junior lawyers to hang in there and to think positively about the future. “It may seem like rotten luck to qualify into a recession, but it can pay off in the long term,” he emphasises.

Not sure if there is a job for you at the end of the training tunnel? Trainee Solicitors’ Group chair Nadia Akhtar explains how to tackle the prickly issue of qualification with your boss.

‘Some people will know if their firm is offering them a job at the end of their training contract eight or even nine months in advance. But I have heard of others who have not been told until a week before the end of their last seat. Some smaller firms will just assume that you are staying on at the end of your training contract and will not think to tell you. Every firm is different.

But if you have had no indication about the future from your firm, then my advice is to be proactive. Ask if there will be any opportunity for you to remain with the firm.

The Trainee Solicitors’ Group is all for people taking positive responsibility for their own careers. So if you have not heard anything from your firm, then you should speak to your supervisor to see how you can take things further.’