Legal banking roles in post-brexit UK: reasons to be cheerful?

Transcription

1 Law LAW sector SECTOR report REPORT Legal banking roles in post-brexit UK: reasons to be cheerful?

2 Contents Banking versus law vacancies M&A activity and IPO activity Regionalisation and salary Top 10 Law Firms for Vacancy Data

3 Banking versus law vacancies CHART 1 The Red Tape Cost of Brexit Report released by Oliver Wyman and Clifford Chance in March this year stated that Brexit outcomes remain uncertain with a wide range of future trading relationships between the EU27 and UK still possible. Most firms remain unsure of the impact Brexit will have on their businesses. With this question in mind, our analysis aims to understand how the market for banking lawyers may have been affected by the referendum result, and how the future could look. We will look at key trends and insight for hiring in the sector, as well as analyse M&A and IPO activity to understand how these areas may relate to the sector s performance. We can see a clear pattern between growth in banking and banking law roles as represented in chart 1. As growth in the banking sector picks up, so does activity for lawyers covering the banking sector. Clearly, the chart shows that there has been growth for both sectors since the referendum. Is this a sign of a resilient banking sector or is there an alternative narrative for this change? Both sectors took a plunge in late 2016, and have slowly crawled back, with activity for 2018 starting to show levels close to growth last seen before Brexit in early These figures could be taken as an encouraging sign for lawyers in the banking sector. Will the two sectors be able to sustain this level of recovery over the coming year? The proportion of banking law vacancies compared to law vacancies overall as seen in chart 2, provides more evidence of the correlation between the two sectors, with the growth in the proportion of banking roles mirroring the recovery seen chart 1. The message here seems to be that if the banking industry can continue to grow in the UK post-brexit, then the market for banking lawyers should grow in tandem. May 2018 UK Banking vacancies versus Law vacancies Between 2016 and Q2 Q3 Q4 Q2 Q3 Q4 VAC BANK F/M LON VAC LAW LON Proportion of banking law vacancies against total law vacancies Between 2016 and Q2 Q3 Q4 Q2 Q3 Q CHART

4 M&A activity and IPO activity European M&A activity has seen a recovery over 2017 as well as record highs for 2018 so far in terms of deal value. Mergermarket s 2018 report mentioned M&A activity for 2018 had reached its highest-post crisis value and marked the third time in mergermarket history that Europe has breached the US$ 250Bn mark at this point in the year. These are reassuring signs given London s traditional strength in Europe as an M&A hotspot, and could broadly correlate with the encouraging trajectory in vacancies for banking lawyers in the same period, suggesting the sector is growing. The question around the surge in M&A activity over 2017 and for 2018 so far is whether what we re seeing is essentially an attempt to shoehorn deals in before the UK is officially set to leave the EU on March 29th Philip Noblet, HSBC s co-head of global banking for the UK, said that a lot of the obvious sector consolidation deals that people expected to happen in 2017 were driven by the Brexit climate which is prompting companies to bulk up. Likewise, the UK s IPO market may tell a similar story, where firms are moving fast before Brexit hits to minimise the potential damage that leaving the EU could have on deals. Clifford Chance global capital markets head, Adrian Cartwright mentioned that most companies are looking to get IPOs away in 2018, as the first half of 2019 will be overshadowed by Brexit. Perhaps the strong activity seen over 2017 and for 2018 so far is a sign of firms hoping to minimise their exposure to the disruption which will naturally occur after March 2019? CHART 3 CHART 4 M&A Total Deal Value for Europe, Total Deal Value for European IPO activity since May 2018

5 Regionalisation and salary CHART 5 In terms of law vacancies by region, we re now seeing a positive trend in growth for London law firm hiring compared to the rest of the country. Perhaps this indicates that the market for lawyers in London is picking up, correlating with the positive macro indications in increased M&A and IPO activity, as well as vacancy data for the year so far. Outside of the obvious regional importance of the City, London s crown as the European technology capital may also be related. CityAM s Lucy White stated in March this year that between January 2015 and February 2018, the UK attracted 32 per cent of all US tech investments in Europe by number and 38 per cent by value. That s a strong endorsement of London s attractiveness as an IPO and foreign investment destination and is perhaps a good example of why law vacancies are on the rise in London compared to other UK regions. The question remains as to whether these figures will continue to rise after the UK has left the European Union. Another pertinent question is how Brexit may have affected salaries. According to PWC in their 2017 Law Firm survey that the exchange rate volatility we have witnessed this year has given US rivals an even stronger hand in competing for talent. The salary figures as shown in chart 6 from Morgan McKinley s 2018 legal salary report show that the American Law firms have been able to pay newly qualified lawyers more than national Law firms, with pay 34.6% higher on average. Proportion of London law vacancies to overall law vacancies in the UK, between 2016 and average UK salary for newly qualified lawyers, US versus UK firms 100,000 90,000 80,000 70,000 60,000 50,000 40,000 Q2 Q3 Q4 Q2 Q3 Q4 CHART 6 However, the GDP/USD exchange rate has recently climbed to pre-brexit levels. What will that mean for salaries for the coming 12 months if the exchange rate continues to shift? 30,000 20,000 10,000 Newly qualified lawyer, UK firms Newly qualified lawyer, US firms May

6 Top 10 Law Firms for Vacancy Data Pinsent Mason LLP are in first place for vacancy data for this year which is not surprising given their strong UK presence, with 24 offices and over 500 staff in their London headquarters. Financial Services makes up approximately 20% of their revenue, suggesting that their growth for 2018 so far, which is 39% up on 2017, is linked to the strong banking related activity seen in the UK and Europe. Whilst Addleshaw Goddard are in second place for vacancies over 2018 so far, their firm s highest paid partner s salary dropped 30% from the previous financial year which suggests that their hiring figures are not necessarily indicative of stronger business performance and profit overall. There is no crossover between the top 10 UK firms for vacancy data and the top 10 firms for deal size in Europe which may indicate that growth in team size is an important factor in the process to gaining more market share. Magic circle firms Freshfields, Linklaters, Clifford chance and Allen and Overy take the first four places for deal size across Europe respectively showing a strong start to the year for the UK headquarted international law firms. Linklaters, Clifford Chance and Allen and Overy are all new contenders for the top 10 for 2018, with all three outside of the top 10 for last year. Will the UK firms continue to dominate European M&A in terms of deal size over the rest of the year? Herbert Smith Freehills climb to fifth place for total deal size, rising from seventh in Outside of the top five firms with UK headquarters, New York firm Clearly Gottlieb LLP come sixth for deal size, whilst Baker Mackenzie, with headquarters in Chicago come seventh. CHART 7 CHART 8 Top 10 Law Firms by Vacancy Data, Top 10 Law Firms in Europe by Deal Value 2018 in 2018 Pinsent Masons LLP Irwin Mitchell LLP Freshfields Bruckhaus Deringer Linklaters 121, ,372 Addleshaw Goddard LLP 128 Clifford Chance 101,211 Eversheds LLP 188 Allen & Overy 100,339 Slater and Gordon UK LLP 112 Herbert Smith Freehills 71,403 Shoosmiths LLP 109 Cleary Go lieb Steen & Hamilton 59,853 DWF LLP 98 Baker McKenzie 54,491 Oliver and Co Solicitors Ltd 92 DLA Piper 52,797 DAC Beachcro LLP 90 Davis Polk & Wardwell 51,109 Berrymans Lace Mawer LLP 89 Skadden 49,776 6 May 2018

7 About Morgan McKinley As a global professional services recruitment consultancy, Morgan McKinley connects specialist talent with leading employers across multiple industries and disciplines. The Group employs more than 800 colleagues across Australia, Canada, China, France, Hong Kong, Ireland, Japan, Singapore, India and the United Kingdom. Through its Global Services Centre and Career Ally programmes, Morgan McKinley is committed to developing global specialist talent pools that best serve the needs of both job seekers and employers. As part of our UK Professional Services division (Legal, Taxation, Audit & Advisory) our Legal team engages on mandates within a broad client base of all sizes from Law firms to Financial Services to Commerce & Industry; at all levels from paralegal/newly qualified to Head of/partner roles. If you are investigating your next career move or looking to hire within your team, our dedicated team of consultants are best placed to work in partnership with you. For an initial discussion please contact: Ian Barker UK Director, Professional Services E: ibarker@morganmckinley.co.uk Tel: About Vacancysoft Vacancysoft is a subscription-based data publisher for the Recruitment Industry. Established in 2006, we now have thousands of subscribers worldwide, clients range from FTSE listed businesses to industry specialists, whereby we optimise business development and client care. Our Vacancy Tracker provides real-time updates of the latest vacancies being published on company websites, with every user having the ability to create their own personalised feed. Sign up for a free trial. Our Market Reports are written in partnership with leading organisations in the recruitment industry providing unique analysis and insight on the latest trends and are frequently quoted in leading business media. Please our support team at support@vacancysoft.com if you have any specific questions regarding this report. Our Recruitment Industry Insights Newsletter contains all the reports, along with other analysis we produce and are published to all relevant people in the recruitment industry. Register for our newsletter. Our Business Intelligence Unit then works with clients to provide bespoke solutions enabling greater insighton market trends enhancing strategy and planning. Contact us to find out more at support@vacancysoft.com.

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