The price of Brexit: $210K for a 3PQE

Of all the investors in the UK legal market few spend more, at least on a per lawyer basis, than US firms. And the signs are that for many of the lawyers at these firms the short-term impact of Brexit has been nothing but good.

“If anything Brexit has increased salaries at US firms in London, absolutely,” said Hamish Drake, a legal market recruitment consultant at Michael Page. “I recently placed a 3PQE candidate at a top US firm on £190,000 plus. A year ago that role would probably have been around £50,000 less. Some firms are now pegging their salaries to the US dollar and they’re also updating quarterly. I’ve seen candidates get an offer at one rate and then have this reviewed when they start. This is new since Brexit.”

The rapid decline in the value of sterling has meant that lawyers at US firms who are paid in dollars have seen a major uplift in their pay packets. On top of that the ramped-up pay scales introduced at the end of 2016 have left associates at a raft of US firms in London on the highest salaries ever seen at these firms’ outposts in the City.

Last year New York firm Cravath Swaine & Moore raised its starting salary for junior lawyers from $160,000 to $180,000 (at current rates around £143,000), sparking copycat rises among many of its competitors includingKirkland & Ellis, Latham & Watkins and Milbank Tweed Hadley & McCloy, all of which moved their UK associates on to the new US pay scale.

There are also indications that more senior associates are in clover like never before. Preliminary research for The Lawyer’s forthcoming US Top 50 firms in London report has revealed that some lawyers at the 3PQE level are being paid in excess of $200,000.

Akin Gump is one such firm. It is not only now paying its newly qualified lawyers on the Cravath scale but its 3PQE associates are on what is thought to be a record high remuneration of $210,000. Indeed last year The Lawyer revealed that Akin had reviewed its associate pay rates following the EU Referendum and the resulting decline in the value of the pound against the dollar. The firm now resets salary rates every quarter.

Akin’s associates also qualify for a bonus. For example, class of 2013 associates receive a bonus of $50,000 while its class of 2009 get double that.

But even that’s not all. As the firm points out in its submission to this year’s US Top 50 firms report, “in addition, those associates and counsel whose performance and productivity are deemed extraordinary received additional bonus amounts ranging from $5,000 to $25,000 above the market level for their class” (the full US Top 50 report will be published on 8 May).

No sign of any Brexit fears there. And in a related trend to higher salaries and more transparent career progressions, Sam Walters at Roberts Walters revealed that as well as more money, some US firms are also offering more clarity on partnership prospects.

“Basically they’re starting to say to associates at around 6PQE ‘we want to show you what a fair crack of the whip looks like’,” said Walters. “The modern workforce wants partnership yesterday so firms are having more rigid conversations about it. We’re certainly seeing this more than we’re seeing things like currency hedging.”

While most recruitment consultants agree that many firms remain wary in terms of hiring in the Brexit age, with numerous instances of candidates reaching the final round and then having the roles either pulled or not offered with no reason given, several US firms are still hiring furiously in select areas of their business.

“The financial restructuring recruitment market has become really busy because clients tend to restructure their debt at a time like this to avoid going into insolvency,” said Drake. “I’d say there’s an insatiable appetite. Some firms are even taking on lawyers with no experience and training them up because their clients are restructuring their debt.”

Walters said that while the immediate impact of the referendum vote last June had been a slowdown in transactional areas such as corporate and real estate, activity levels had rebounded.

“The combination of the weakened pound and the post-Trump talk about deregulation, notably in relation to Dodd-Frank, has definitely resulted in a bounce back in some transactional departments,” added Walters. “The derivatives space is certainly busy but I’d say one of the biggest areas currently is the real estate vertical coming back, with higher levels of investment into the property market because of the weaker pound.”

“The obvious area is trade and financial regulation,” added Sloane Poulton, a director at Edward Gibson. “Firms are certainly recruiting in trade and there’s a very small pool.”

One recent high-profile move in this area was that of Jasper Helder, the chair of Baker McKenzie’s EMEA international trade and commerce practice who joined Akin in London at the end of last year.

Recruiters agree there are no signs so far of a Brexit-related exodus from the UK, although as the majority of US firms’ London offices are outposts set up to service their US clients’ overseas activities, should these clients become more active on the Continent it is likely only a matter of time before the firms do too.

“Law firms follow their clients,” pointed out Poulton. “It’s very rare for a firm to invest in an area simply to buy loyalty two years ahead of the time it might need it. They won’t want to have people sitting around twiddling their thumbs waiting for the anticipated flood of work to hit. They’re cash businesses. They have to justify the business case much quicker than 18 months to two years.”

In the meantime, for the right lawyer in the right area, US firms in London currently look like they will move mountains to get the people they want.