Law firms are gearing up for a recession by embarking on a recruitment spree of finance lawyers and wooing newly qualified recruits with starting salaries of up to £179,000, according to a new analysis of jobs data by the legal recruitment and search consultancy Tenhaven.
The research showed that vacancies for City lawyers specialising in banking, leveraged and real estate finance, capital markets and derivatives surged by 38.7% in the first seven months of 2022.
The battle for top talent has seen salaries soar, with two of Britain’s elite Magic Circle firms increasing the pay packets offered to newly qualified recruits by 17% since the start of the year, to £125,000. Meanwhile the highest paying US-headquartered law firms operating in London have hiked their starting pay for newly qualified lawyers by 12% to as much as £179,000.
Official data released this week showed that the average worker’s regular pay, excluding bonuses, grew at an annual rate of 4.7% during the second quarter of 2022. While this marked the fastest pace of wage growth in 15 years, excluding the pandemic, high inflation meant that workers’ pay fell in real terms by a record 3%.
The legal hiring boom comes as Britain lurches towards recession. ONS data shows the UK economy contracted by 0.6% in June, and shrank by 0.1% across the second quarter of the year.
Two drivers lie behind law firms’ arms race for the best talent. The first is a desire to capitalise on the post-pandemic surge in companies’ demand for support with mergers and acquisitions, and a push to get deals done before the recessionary storm breaks.
The second is a pre-emptive tooling up for what could be a rocky period of financial restructuring and the acquisition of distressed assets, as companies driven to the brink by recession seek help or are put up for sale.
Akshay Nayak, Managing Director at Tenhaven, said, “The recessionary clouds gathering over the economy represent both a challenge and an opportunity for law firms and their clients. On the one hand, those firms who’ve been helping companies with mergers and acquisitions in the wake of the pandemic will be racing to get deals completed before the economy turns, and these firms need all hands on deck right now.
“Meanwhile, astute firms are also preparing for what a prolonged recession could mean for Britain’s totemic finance sector. If the economy does turn, many businesses will need help with restructuring and a battening down of the legal hatches, and acquisitive clients will be seeking investment opportunities among the companies whose value is adversely impacted.
“Recruitment trends offer valuable straws in the wind for the business climate. With salaries soaring and legal firms jostling to secure the best talent, it’s clear that London’s top lawyers expect a busy, unsettling time ahead for the City’s financial engine room.”