It has been a bumper year for the UK’s leading commercial firms. There have been double digit rises in both growth and turnover across the board, with London’s big four securing their place among the emerging global elite.
But this record performance has been achieved at a cost – stretched leverage, long hours and diminishing partner prospects are surely pushing firms to breaking point.
Do partners justify their hefty pay packages? Will clients continue to bankroll them? Is the near-obsessive quest by the leading firms to overtake the profitability of their US rivals sustainable?
Or is it time for managing partners to call a halt to the relentless drive to achieve double-digit annual growth for the sake of the long-term viability of their practices?
Contribute to the debate by posting your views here.
The magic circle are chasing an illusion at huge cost to their cultures. These are exceptional conditions for international transaction-based firms. Come the next downturn it will all come crashing down and the US firms will once again power ahead thanks to their mighty litigation and bankruptcy pracitces.
If PEP at the magic circle firms is now reaching top US levels why are associate salaries lagging behind what even the mid tier US firms are paying now?
The 2002-2004 period when US firms were in the ascendancy was based, from a contentious perspective, on the perfect storm of an unprecedented wave of post-Enron chapter 11s, rampant securities litigation and the cash cow that was SarBox compliance. It’s far from certain that a similar mix of forces will reoccur in the next cycle, especially since the plaintiff Bar are under such political pressure currently. And even with those conditions back then - and New York at the time still standing as the world’s undisputed financial centre - I’m not really sure that the US firms really did “power ahead”. They certainly put the magic circle on the back foot for a while but not much more but even that was partly because the Brits were struggling with their post-expansion hangover. It’s right to highlight the cost to culture but it’s a pretty similar story at most large US firms. Obviously things can change quickly but, providing the pound holds, up the magic circle look more battle-hardened this time round.
If associate salaries weren't lagging behind those of mid-tier US firms then UK PEP wouldn't be catching up.
It is true that associate salaries have recently increased at many firms by about 15-20%. Partners like to go on about this and to make associates feel as if they should be really grateful. But then you hear that PEP at some firms are almost TWICE (i.e. 100%!) more than they were three years ago. And yet partners continue to wonder why so many associates are leaving their firms/the profession, and resent partners so much...
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