Birmingham’s corporate work is drifting away, but new entrants are chasing its growing commercial market. Derek Bedlow asks if there is enough work to go around
Not so long ago, the middle tier of Birmingham’s legal market was a pretty comfortable, if unexciting, place to be. The city’s big five — Wragge & Co, Pinsent Curtis (now Pinsent Masons), Eversheds, DLA and Edge Ellison (now Hammonds) — had for some time been fishing in waters well outside of the West Midlands, leaving a significant, if waning, corporate client base behind for the middle tier to carve up in gentlemanly fashion.
Recent years, however, have seen a dramatic reversal of this scenario as a slew of firms from outside Birmingham have pitched up and expanded rapidly in the second city. Notable newcomers include Bristol’s Clarke Willmott and Bevan Brittan, Northampton-headquartered Shoosmiths and Cobbetts from Manchester. Nottingham’s Browne Jacobson has significantly ramped up its longer-standing but insurance-focused West Midlands base with corporate and commercial lawyers, while Mills & Reeves’ formerly public sector-oriented Birmingham outpost has benefited from a large proportion of the firm’s recent investment.
The growth rates of some of these firms’ Birmingham operations have been rapid — Browne Jacobson, for example, has more than doubled its headcount in two years to more than 100, while Clarke Willmott has almost 50 lawyers in place from a standing start in 2004 — but there are doubts about whether the market is large enough to sustain all, or even some, of the new entrants.
“Our growth as a business means we are now doing work that we would not have done five years ago, so there is room below us to some extent,” says Chris Rawstron, managing partner of DLA Piper’s Birmingham arm. “But there is only a finite amount of business in Birmingham and, to be blunt, it is not that big a market.”
For now, however, the newcomers are finding Birmingham an attractive place to be. “The market is a relatively open one that encourages competition,” says David Sedgwick, managing partner of Clarke Willmott. “There is a rate of change and dynamism in Birmingham that is encouraging a lot of firms to move in and, while there are already some excellent firms, there is space for a firm like ours.”
In the longer term, the size and the potential of the West Midlands legal market is only part of the gameplan for the new kids on the block. They may have arrived by different routes, with different strategies in Birmingham, but the number one motivation for all of the new firms to invest in the city is to enhance their credentials as national firms and win clients and work from all over the country and beyond. In essence, they see Birmingham as an ideal base from which to achieve their ambitions.
“For some of the work we and other national firms do, there is a perception that you need to be in a particular location to be credible,” says Stuart Whitfield, chief executive of Bevan Brittan. “We can also pick up skill-sets in the West Midlands that we might not have elsewhere. There is a bigger pool of resources to draw from.”
And, rather than saturating the Birmingham legal market, the expansion of other firms will ultimately enhance it, claims Browne Jacobson managing partner Brian Smith. “It is an expanding marketplace,” he says. “Like Leeds, Birmingham firms can expand their offering well beyond the local client base. There is no limit to what can be achieved if we can firmly establish Birmingham as the UK’s second legal city as it expands. We are not taking work from the bigger firms or competing too hard with other new entrants — we are collectively trying to make the cake bigger.”
Birmingham, like Leeds, has a base (albeit a dwindling one) of plcs and growing owner-managed businesses; it also enjoys a strong network of other professionals. As a base for developing a national firm, however, Birmingham has one key difference compared with Leeds and Manchester — its location. It is an old maxim in Birmingham that the city’s biggest asset over the other main regional legal centres is its proximity to London, but that its biggest disadvantage is… its proximity to London.
Ever-decreasing circles
One consequence of this has been that while Birmingham’s law firms have used their lower cost-bases and geographical advantages to successfully win plenty of general commercial work from London firms, Birmingham has not proved to be as fertile a breeding ground for winning corporate transactions as its northern counterparts. The decision of venture capital houses 3i and Bridgepoint to cover the region from their London bases symbolised Birmingham’s difficulties in winning significant national work in quite the same way as many Leeds and Manchester-derived firms have successfully done.
Corporate remains an important discipline in Birmingham and deal levels have recently recovered significantly. But these deals have tended to be larger but less frequent, making it more difficult for newcomers to break in without significant numbers on the grounds.
“There has been a huge increase in corporate work in Birmingham recently, but London has become the focus of corporate transactions,” says Joel Kordan, head of Shoosmiths’ Birmingham office. “In the late 1980s, corporate was the pre-eminent discipline in Birmingham. There has been a slow reduction since then, while areas such as property and construction have become bigger. That effect has become more pronounced as time has gone on.”
Instead, the city has developed as a centre of excellence in ‘commercial’ disciplines — notably property, construction, IT, pensions, outsourcing and employment advice — while the wave of regeneration in Birmingham of the last decade has provided the city’s lawyers with expertise in property and construction projects that they can sell throughout the country and beyond. Even Birmingham’s biggest firm, Wragges, which has enjoyed significant success in a bluechip client base, lists its biggest single practice area as property. The focus of the new and aspiring national firms in Birmingham will inevitably have to follow suit.
Moving the market
Wragges senior partner Quentin Poole estimates that around 80% of his firm’s work comes from clients located outside the West Midlands — a similar figure to the other big players. Consequently, the effect of the new entrants on the work of the big five has been limited. Their effect on the recruitment market, however, has been anything but. Not all of those who have migrated from the larger firms were necessarily the lawyers the big five most wanted to retain — the most common category of leaver has been senior associates unable to make the step up to partnership. But with Wragges this year only making up two new partners, the partnership prospects for senior associates at Birmingham’s biggest firms are weak — making the expansive newcomers an attractive proposition for many.
And the new firms have scored some significant partner moves, such as Browne Jacobson’s capture of Paul Wray from Eversheds and Jeremy Bowden’s move from DLA Piper to Clarke Willmott — clearly not all of the leavers have the blessing of their former employers. And more recently, the flow of senior lawyers has begun to slow as the new players look to bulk up at more junior levels.
“The new firms are not having an impact on the work we are doing, but they are having a noticeable effect on the recruitment market,” says Ian Forrest, head of Hammonds’ Birmingham arm. “Individuals that we would like to keep are being poached and there are fewer potential recruits than there used to be.”
The incoming firms are also benefiting from the release of some pent-up demand from inmates of the big five. “In the past, if you were unhappy with life in one of the big firms, there were not a lot of options other than moving to another similar firm,” says recruitment consultant Philip White of Chadwick Nott. “There was no obvious way out of the big firms without compromising on quality. Now there is. The new entrants have good brand names and people feel more comfortable about moving to them.”
The firms themselves put their success in the recruitment market down to a combination of push-and-pull factors.
“We are able to attract a stream of high-quality people because, as a new entrant, we enjoy the perception of being dynamic and having momentum,” says Clarke Willmott’s Sedgwick. “I recognise that this is probably a honeymoon period for us and that it will not be quite as easy to recruit in the future.”
“The larger firms are more micro-managed and monolithic now; some partners feel they have no control over their own destiny,” adds Shoosmiths’ Kordan. “Smaller offices such as ours are more personal and people have a greater say in our strategy.”
Stuck in the middle?
One inevitable consequence of so many firms trying to gain a foothold in the market at the same time has been a considerable degree of low-balling for corporate and run-of-the-mill property transactions. Nevertheless, as with the big five, the firms that traditionally comprised Birmingham’s middle tier — HBJ Gateley Wareing, Martineau Johnson and Shakespeare Putsman — also claim to be largely unaffected by newcomers.
For HBJ Gateley and Martineaus, this is in part because they too are following similar strategies to the incomers — using their Birmingham bases to launch an assault on the national market. Martineaus is pinning its future growth on the sectors in which it has developed a national client base — energy, venture capital trusts and education — while HBJ Gateley has successfully tied its practice into the plc market, thanks to a Scottish merger and a London office. “We will grow in Birmingham, but we are not in a hurry to add numbers,” says HBJ Gateley senior partner Michael Ward. “If you want to act for larger corporates, you need to be able to deliver across the UK.”
Shakespeare Putsman, meanwhile, the product of a merger between two long-established mid-tier firms this year, plans to put its newly-acquired buying power to work for the benefit of its local client base by increasing its range of specialist expertise and increasing its capacity.
“Both Shakespeares and Putsmans had strategies that were very focused on the Midlands market and that remains the case,” says the firm’s chief executive, Paul Wilson. “We have national clients, but there are lots of people playing in the national market. We are focused on being the premier lawyers to companies and individuals in the Midlands.”
Almost all of the mid-market in Birmingham — old and new — have big plans. Clarke Wilmott is relocating its headquarters to the city and Browne Jacobson has a stated objective to be as big in Birmingham as in its Nottingham homeland, which would mean quadrupling in size. But are such plans unfocused? Some believe so.
“Birmingham is a logical place for firms with national ambitions to put their standards up, but it has become an over-fished market. There has perhaps been a rush to enter the market without thinking too much about the strategy there,” says management consultant Nick Jarrett-Kerr of Kerma Partners.
But the big question for firms in Birmingham is whether there is enough steam in the recruitment market for them all to realise their ambitions, at a time when the flow of qualified staff from London has slowed. “The biggest issue facing new firms in Birmingham is recruitment,” says White. “It is an issue everywhere, but in Birmingham it has now moved into a different league as newcomers have shaken up the market.”
Those that do not reach critical mass in Birmingham may find they come unstuck as and when the next downturn in work arrives.
Postcards from the market
Brian Smith, Browne Jacobson
“The biggest challenge facing our firm over the next 12 months is continuing the level of growth we have achieved in Birmingham: 140% in three years.
“The achievement I am most proud of as managing partner is going straight into the top 50 of the Sunday Times Best 100 Companies to Work For after entering for the first time in 2006.
“In the East Midlands, the market is holding up well. In the West Midlands, it is growing even with the increasing amount of providers in the region.
“The biggest hurdle facing law firms in the Midlands today is the recruitment of high-calibre individuals in the face of competition from other regional law firms and a crazy legal marketplace in London.”
Chris Rawstron, DLA Piper
“The biggest challenge for our firm over the next 12 months will be the recruitment of the right quality people.
“The achievement I am most proud of is the progress that the Birmingham office has made in the Midlands market over the last 10 years. Corporate is roaring on all cylinders in the local market, and the other practice groups are performing well.”
Roger Blears, Martineau Johnson
“The biggest challenge we will face over the next 12 months is judging the pace at which we should respond to the challenge of globalisation, and the opportunities offered by China and India in particular.
“My management philosophy is that great lawyers know what to do — appropriate management is to let them do it with the minimum of interference.
“The Birmingham legal market is a great magnet for top-class lawyers who prefer the lifestyle available in the Midlands compared to working for a magic circle firm somewhere in Docklands.”
