Top Australian law firms rethink cost bases amid deal drought as global downturn goes Down Under

A host of Australian law firms are cutting lawyers and support staff as market activity slows and firms gear up for a difficult 2013.

Clayton Utz, Allens and DLA Piper are among those making lay-offs in recent months, with some partners expecting further cuts next year as firms attempt to slash costs.

Clayton confirmed that around 20 people have been made redundant in Sydney and Melbourne, including between 10 and 15 lawyers as well as a number of support staff.

Allens has also asked a number of its employees to leave over the past six months, but would not confirm details.

DLA Piper is set to make a small number of redundancies, thought to be under 10, with a mix of back office staff and fee earners affected.

Clayton said it had been reviewing its structure in response to client conditions and the depressed economic climate in Australia. A spokesperson added that "only a small number of people" had been affected and said it was "not planning any further redundancies".

Allens, which formed an alliance with Linklaters on 1 May, said: "Managing staff levels and capacity are commercial realities that firms address periodically."

Ashurst Australia, which previously operated as Blake Dawson, is another firm understood to have been taking steps to address its headcount domestically.

It would not confirm redundancies, but a spokesperson commented: "This is a very challenging market and [the firm] has made some adjustments in response to prevailing economic conditions."

King & Wood Mallesons - formed by the December 2011 merger between China's King & Wood and Australia's Mallesons Stephen Jaques - said that while it had not made job cuts, reducing costs was a priority with the firm also implementing a recruitment freeze (excepting a business imperative) since July.

"We're always looking closely at how our business can operate more efficiently," said Australia managing partner Tony O'Malley (pictured). "It will be even more important to get this right in 2013 as we expect the market to remain soft and to continue to feel the impacts of longer term shifts in the legal sector."

Freehills, which joined forces with UK firm Herbert Smith in October, said it was not planning to reduce staff numbers in the near-term.

Minter Ellison chief executive partner John Weber also stressed that the firm had not made any redundancies despite the difficult conditions, though it had cut some discretionary spend.

Australia has traditionally been one of the world's most resilient markets - fuelled by a booming mining sector - with countries including India and China investing billions into the resource-rich country in view of its coal and iron ore reserves.

But experts predict the economy could take a turn for the worse next year, with mining investment expected to drop as China growth slows, while commodity prices have been falling and the Australian dollar remains high. A report by the Bureau of Statistics earlier this month said Australia's economic growth rate had slowed to 0.5% in the third quarter of 2012, down from 0.6% in the past three months.

"Two months ago, everything stopped in Australia," said one consultant. "At the moment, everybody is putting deals on hold, lawyers are not busy and corporate is dead everywhere. Absolutely dead. Most firms' finance groups aren't busy either."

The downturn in the market comes as K&L Gates this month became the latest international law firm confirming its entry to the Australian market, with partners voting unanimously in favour of a full financial merger with Middletons.

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