Magic Circle law firms cut fees in half
THE CITY’S Magic Circle legal institutions have been forced to slash their partners’ hourly fees by almost half, as they fight for business in a recessionary market.
The latest closely-watched average hourly rate survey by Knightsbridge-based costs lawyer Jim Diamond has revealed the Magic Circle is offering out lawyers at bargain rates.
“It is now possible to retain a magic circle firm partner for under £500. It is the first time in at least five years such a rate has been available,” said Diamond. “In fact a discounted deal rate for a Magic Circle partner could be around the £400-mark in reality,” he added.
The giant charge cuts, from fees as high as £750 last year, suggest 10,000 more jobs will have to be cut in the legal sector in the next 12 to 18 months, he said. “I can foresee carnage in the legal marketplace if work does not pick up and pick up now.”
The massive reductions are not being seen in the US, the survey suggests, with top law firms over the pond still charging around £400 an hour for use of their partners. This is only slightly below the £425 to £550 rate clients would have expected to pay in 2008.
Diamond, who worked in-house at magic circle giants Clifford Chance and Allen & Overy before forming his own practice, said the bargain rates will put massive pressure on mid-market legal firms.
“Gone are the days when a mid rank firm can justify their rates on the basis that the Magic Circle is 50 per cent more than theirs.
“Call me old fashioned but lawyers will have to justify rates on the basis of expertise and value offered to a client,” he said.
But while the cost of retaining a partner has been slashed, newly qualified lawyers can still be used for £250 an hour, no change on last year and partners with five years’ experience post-qualification also cost the same.
MONEY TALKS:THE CHANGING COST OF A TOP LAWYER
LAW FIRM PARTNER PER HOUR (£)
London Magic Circle firm United States top firm
2007 625-700 450-500
2008 600-750 425-550
2009 450 400
LAWYER WITH 5 YEARS’ EXPERIENCE PER HOUR (£)
London Magic Circle firm United States top firm
2007 375-400 325-360
2008 350-400 300-375
2009 375 325
NEWLY QUALIFIED LAWYER PER HOUR (£)
London Magic Circle firm United States top firm
2007 235-250 215-225
2008 250 225
2009 250 225