Almost half of the top 25 law firms axed dozens of their own partners in last-resort moves to cut costs and shore up profits last year.
A snapshot of the UK’s corporate law industry will reveal today that the biggest firms are still struggling to raise revenues in the wake of the slowdown in corporate activity. As a result, law firms are being forced to run themselves along more “corporate” lines than ever before, a closely watched report says.
Although the survey, by PwC, the professional services firm, critices some firms for being slow to respond to tough market conditions, it found many had taken an unprecedented “strategic approach”, dumping underperforming partners and waging war on costs.
PwC says that about 10 of the country’s biggest firms forced out partners last year in response to the tough market conditions, demonstrating that partnership at the biggest corporate law firms is no longer the guarantee of a fat income for life that it once was.
The findings come just weeks after Lovells, one of the five biggest London-based corporate law firms, announced the most public cull yet, removing 25 partners and stripping another 10 of their equity stake. Most of the other big law firms have quietly “managed out” some of their partners to try to avoid attention.
The cuts will take time to filter through to the bottom line though, as most departing partners will insist on at least a year’s pay: £500,000 or more at the top firms.
Alistair Rose, head of PwC’s professional partnership advisory group, said: “Law firms are not used to reducing their partner numbers and that creates uncertainty because it’s not a pleasant experience if you have been operating in a collegiate atmosphere. But firms have been forced to become more strategic. They have taken a long hard look at their cost base and I don’t think they have had to do that in the past.”
Correspondingly, many big firms are also creating fewer new partners “but that has lots of knock-on effects in terms of motivating the people at the next level down,” Mr Rose added.