Firms swim against the cost-cutting tide

James Swift, reporter, The Lawyer


Institutions and companies have never enjoyed spending money on lawyers, but in the good times spend they did – and how.

Between 1998 and 2008 law firm fees rose by 70 per cent compared with non-legal services, which rose by only 20 per cent, according to Mark Harris, CEO of Axiom – a law firm that seconds its lawyers to clients on a freelance basis.

Since the downturn, though, cutting costs has become a must for in-house counsel. Private practice lawyers are constantly bemoaning how the pressure on fees continues.

Nowhere is this more obvious than in the public sector. Earlier this year Lawyer2B’s sister publication The Lawyer reported on how firms had withdrawn from the Metropolitan Police’s panel review process – whereby firms pitch to get on a roster of firms the institution can choose from when it needs advice – after the Met’s legal department insisted it would pay lawyers no more than £130 per hour (The Lawyer, 18 July). Partners at magic circle firms often charge around £700 per hour. At a time when the Met was fending off allegations of misconduct in relation to the News of the World phone-hacking scandal, the fees cut seemed like a bad plan.

Similarly, the NHS has been forced to slash its legal spend, and rates were an issue during Health Trust Europe’s London Procurement Programme panel review (The Lawyer, 1 August).

“The question is where you price yourself to get on this panel and still keep the work profitable,” a source close to the review said at the time.

Speak to any in-house lawyer and they will tell you how their managers now expect them to get more out of their external lawyers on a reduced budget. In short, both in-house and private practice lawyers are expected to do more for less.

Also, the fall in deal activity and intense competition among large private practice firms has tipped the balance in favour of in-house counsel.

Firms are keen to show their commitment to clients, and know that if they are to win work they must stay close to them. A good example of this came in September, when Allen & Overy seconded a team of lawyers to News International, parent company of The Times and The Sun, to help it deal with the legal fallout from the phone-hacking scandal (The Lawyer, 16 September).

At a time when law firm training contracts are hard to come by, the in-house route offers another career path for would-be lawyers, as well as a chance to hone your haggling skills.

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