Partner Rates Plummet At Top London Firms: Report

By Tina Peng

Law360, New York (September 22, 2009) -- Partner billing rates have fallen to their lowest level in at least five years at the top five London-based law firms, according to a newly released survey.

Over the past twelve months, average partner rates at Magic Circle firms dropped from £675 ($1,102) an hour to £450 ($735) an hour, according to a survey by legal costs lawyer Jim Diamond released Tuesday and published in the Legal 500.

London's top five firms — Allen & Overy LLP, Clifford Chance LLP, Slaughter & May, Freshfields Bruckhaus Deringer LLP and Linklaters LLP — have not only slashed their prices, but also started focusing on less lucrative, midmarket litigation, London-based legal publication the Lawyer reported Monday.

Over the past five or six years, rates have grown at unsustainable double-digit percentages, Diamonds said.

“Somewhere down the line, the bubble had to burst,” he said.

Price cuts have been less drastic in the rest of the British market, according to the survey: Partner rates at London firms outside the Magic Circle fell by almost 14 percent to £375 ($613) and the average hourly charge for a partner at a national firm dropped about 4 percent to £325 ($531).

But Diamond predicted that the rate fall among Magic Circle firms would have a “crashing effect” on smaller firms.

“Gone are the days when a midrank firm can justify their rates on the basis that the Magic Circle is 50 percent ... more than theirs,” he said. “Lawyers will have to justify rates on the basis of expertise and value offered to a client.”

In 2009, law firms have been offering a standard reduction in hourly rates of 10 percent or 15 percent below 2008 figures, although the discounted rates could fall as low as 50 percent, Diamond said.

Still, according to the Lawyer, rates for the highest-profile litigation “have continued to soar,” with top insolvency partners still pulling in up to £900 ($1,470) an hour.

Alternative billing arrangements such as fixed fees have become more popular, but hourly charges remain the most common billing method in the U.K., the legal news publication said.

Diamond's survey also predicted that more than 10,000 more lawyers and support staff could become unemployed or be reduced to part time in the next 12 to 18 months if work does not pick up soon.

In America, he said, average partner rates at the top law firms have dropped 18 percent, to £400 ($653), though rates for new hires have remained steady at £225 ($367) an hour.