Leading London law firms are reforming their decades-old system of hourly charges under pressure from clients complaining of high fees at a time of soaring legal industry profits.
Top firms told the Financial Times they were increasingly offering alternatives to hourly rates and making more use of cost-cutting business practices, such as putting services offshore.
Tim Jones, head of the London office of Freshfields Bruckhaus Deringer, said that, although hourly billing still had a “fairly central role in most people’s thinking”, firms were increasingly offering clients deals such as fixed fees or rates tied to the success of transactions.
He said: “The big firms are very conscious that the efficiency of working practices is going to be absolutely fundamental in the coming years. We will have to look very carefully at how our terms are structured.”
Some big company clients have grown increasingly unhappy as hourly rates – which firms do not disclose – have edged up to £750 or more per hour for advice from a leading partner. Charges for routine work – such as some corporate transaction due diligence – can reach £300 an hour.
Simon Davies, managing partner of Linklaters, said a “significant amount” of the firm’s work was no longer charged at hourly rates. “It could be a mixture of fixed fees and success fees, or one may simply agree a fee with a client at the end of the deal.”
More than half of the top 10 UK-based firms by turnover told the FT that they were changing the way they worked to try to cut costs, especially for routine work such as document production.
The shift highlights growing external pressures on the traditionally conservative legal profession after a period of dramatic earnings growth achieved through international expansion and the mergers and acquisitions boom.