Bargain basement Wall Street

At a conference recently, a senior lawyer from Credit Suisse advised delegates to shop further than the top-tier advisers in their respective jurisdictions as a means of keeping a lid on costs - the logic being that you "don’t have to spend $900-an-hour with Sullivan & Cromwell" for much of your run-of-the-mill work.

At those levels, UK clients may have gotten it wrong by shipping work out to mid-tier City and regional firms – perhaps they should be instructing the London arms of Wall Street’s finest if they want cheaper bills.

Because as Legal Week research today shows, the gap between headline rates charged in London rates and New York appears to be widening significantly as UK firms push through substantial fee-hikes.

Even allowing for the likelihood that American firms – themselves wrestling with an expensive pay war – will also have raised their rates substantially, the gap between the two markets has never looked so stark. So while $900-an-hour may still get you a fairly big beast on Wall Street, London currently has senior associates charged out at more than that. And at partner level, some mid-tier and national firms have hourly rates of £600, while a general magic circle rate is reported to be in the range of £600-£800.

Of course, it’s not quite that simple. Billing practices are often very different at US and UK firms, with the latter group generally being less aggressive about what constitutes a chargeable unit but setting headline rates higher to compensate. Everyone operating in commercial law has heard the anecdotes about US lawyers charging for thinking about a client while in the shower. Fair or not – and obviously UK lawyers have a vested interest in spreading such claims as widely as possible – such tales have had a negative impact on US firms’ reputation in Europe.

An additional factor that could explain the widely-differing rates is attitudes to discounts. At US firms the quoted rate is what you usually get, as it is a market that is still unused to the concept of the volume discount (though it certainly is using the contingent fee model).

But whatever way you cut it, evidence of sharply-rising headline rates confirms London’s position as the world’s most expensive legal market. This is further reinforced at the moment because there is less volume discounting going on, even though the level of auction and speculative bid activity means there are plenty of aggressive contingent fee deals being cut.

In a market where the work is there but the issue is getting enough qualified staff to handle it, the UK model seems better adapted to exploit the situation than the focus on hours still prevalent at US firms. But given these trends, quite a few American firms would surely prove surprisingly good value for budget-pressed clients in the UK.

See The Verdict for the full findings.

alex.novarese@legalweek.com