1,600 polled: bluechip spending plunges as GCs press for value

Bluechip clients aggressively pressed down on legal costs in 2012, according to a major Legal Week research project which shows FTSE 100 clients slashing external spend in response to the uncertain global economy.

The ninth annual Client Satisfaction Report from Legal Week Intelligence found average legal spend across responding FTSE 100 companies fell from £18.7m in 2010 to £12.6m in 2012. Legal spending across the wider companies surveyed fell by almost 50% from £6.2m to £3.2m over the same period. In 2011, FTSE 100 respondents spent an average of £16.1m.

The report is one of the largest research projects ever undertaken among major UK clients. More than 1,650 senior in-house counsel and decision-makers responded to the report, covering 1,204 companies, including 89% of the FTSE 100.

The drop in average legal spend has come alongside an increase in client satisfaction with the cost and billing practices of their external legal advisers, with satisfaction rising from an average of 6.5 out of 10 in 2010 to this year’s high of 7.2.

Some of the drop in average external spend over the last two years is likely to have come from the increase in the number of respondents from mid-cap companies and smaller members of the FTSE 100 in the research, due to its expanding respondent base. Legal spending will have also been hit by historically low levels of corporate activity as cash-rich companies put strategic acquisitions on hold amid global uncertainty.

However, the sharp fall in average spending and rising satisfaction with the historic bugbear of value for money, even among bluechip respondents, strongly suggests that clients have moved over the last two years to finally wring substantive concessions from law firms on pricing and value.

National Grid senior counsel, commercial and disputes, Ian Leedham commented: “Our day-to-day budget has remained frozen for a number of years, so in real terms it has gone down, which I suspect is true for many, but the lack of project, M&A and funding becoming difficult to obtain means the more deal-specific legal spend will have dropped off, which probably accounts for the drop.”

With multiple respondents completing the survey at many of the companies, the report has generated 3,017 rankings for law firms on a range of different criteria. Respondents include company secretaries and GCs as well as finance directors, chairmen and chief executives. The research is used to rate individual law firms according to a range of benchmarks according to the views of their own clients.

In-house counsel were asked to rate the importance of a range of criteria including cost, service delivery, IT, partner relationships, quality of legal advice and quality of commercial advice. They were then questioned on their satisfaction with each.

BT chief counsel EMEA & Latin America, Liz Walker, believes the improvement in satisfaction results stems from closer working relationships between law firms and clients. “It’s probably because law firms and general counsel are working closer together; there’s more of an understanding of our needs and that there isn’t a bottomless pit when it comes to fees. They’re not doing it by osmosis.”

The research also illustrates how client satisfaction levels vary substantially across the different criteria, with quality of legal advice rated as the measure on which clients are the most satisfied.

The full 200-page report is due to be published at the beginning of December and will include extended profiles of more than 30 of the largest law firms as well as qualitative client feedback on all 86 law firms ranked.

In addition to UK respondents, Legal Week has undertaken a separate research project on the views and client satisfaction of clients in the Asia-Pacific region. Findings from the Asia report will be published before the end of the year.

Click here for more information on the Client Satisfaction Report or contact Legal Week Intelligence’s Paul Birk on 0207 316 9864 or paul.birk@incisivemedia.com.