Market Overview
The second half of 2020 was a comparatively quieter market for in-house legal roles. We saw a reduction in open roles and noticed that whilst in-house teams had seen an increase in workload, overall headcount in the main remained flat apart from a few replacement hires.
We have continued to speak with a large number of senior in-house legal counsel & Company Secretaries as well as Private Practice lawyers over the past few months.
We found that in the majority of cases in-house & Practice teams were working longer hours than pre-COVID-19. The absence of time spent commuting meant that teams were able to increase the time available to work by effectively extending working hours to include time spent commuting and in some cases working later into the evening and at weekends.
Whilst the start of Q4 continued to be a quieter market for FS in-house legal roles, we began to see an increase in demand from the beginning of December and this trend has continued since the beginning of Q1.
Impact & Future Implications of WFH
At the time of writing almost all in-house teams are working form home and have no plans to formally return to the office before summer 2021 at the earliest.
Prior to COVID-19 there was a strong interest in flexible working from candidates and increasingly this had come to be seen as a prerequisite and firms that did not offer at least 1 day / from home were increasingly becoming disadvantaged. As it has now been proven that teams and individuals can continue working remotely via teams and Zooms it appears likely that we will not see a return to former working hours and throughout our conversations we have learned that people’s preferred working style will be 3:2 or 2:3 days at home: office.
This will be very hard for firms to row back on and attempts to impose a return to pre – COVID-19 working patterns will in many cases result in staff looking for new roles.
Remoted interviews and onboarding have now become a seamless operation for most firms as they have developed systems and procedures around this. We are now seeing cases where candidates have joined firms and completed a Contract or FTC and left without having met any of their team or management face to face. This is also the case for people who have joined firms since lockdown and have yet to meet team members in person.
Regional Shift
We expect to see Banks and other FS firms continue the shift towards building up their regional offices across the UK notably in: Birmingham, Manchester & Glasgow with the aim of reducing headcount in London. Barclays, HSBC & RBS already have a network of large regional offices and other banks eg Handelsbanken, are working to build out their operations regionally. This shift will be increased by the move towards more flexible working arrangements with the requirement in the office to be reduced & therefore people can commute from longer distances. This may have an impact on base salaries as the current London weighting may become harder to justify as more candidates are sourced and hired locally to be based in Regional offices. We have begun to see instances of candidates being hired to work 100 % remotely with no requirement to go into the offices.
Q1 2021 Post- Brexit landscape
Since the beginning of Q1 we have noticed an increase in hiring for permanent roles across Banking, Asset Management, Insurance and the Private Funds area. Set against this we have seen some firms closing teams or reducing headcount to relocate staff of functions to an EU centre eg Natixis, Societe General. A number of smaller AM firms may also be looking to relocate staff to Luxembourg or Dublin to enable them to continue sales of AM products to EU clients.
Banks
Banks have shifted their stance and have begun to hire across a number of areas as they start to release headcount and revisit previous hiring plans and roles that had been but on hold in 2020. Most noticeably banks have begun hiring and increasing headcount in legal within:
- Markets: FX / Treasury
- Derivatives / Structured Credit
- Prime Brokerage & Collateral
There is an increase in hiring across the ring-fenced banking entities in Consumer & Corporate banking. There is increased demand for General Consumer & Corporate Banking Lawyers as well as specialists in the Consumer Lending areas.
Digital Banking, On-Line Payments
With increasing regulatory attention being focused on the Consumer Credit space & the buy now pay later lenders e.g. Klarna we expect to see increased demand for Legal Counsel focusing in these new sectors. Additionally, with the continued high growth of digital payments platforms & Fintech there will be a continue to be a strong demand for legal counsel with payments PSD2 & Regulatory experience. The payments sector has continued to flourish during lockdown, and we expect to see continued demand e.g. from Amazon/Revolut as well as from new entrants e.g. Stripe who are looking to build out European networks.
Regulatory & Brexit
We have not yet begun to see an increase in demand for Regulatory specialists. We anticipate that this may change over the coming months with more of a demand for European specialists as firms need to adjust to a changing regulatory landscape.
Asset & Wealth Management
Asset & Wealth Management has remained a growth area for hiring and we have seen an increase in demand here for Funds Lawyers as well as Pensions specialists. In terms of funds this falls into 2 broad categories: Funds Structuring / set up and Distribution. Candidates who have experience with UCITs in Dublin / Luxembourg are in demand as are those who have experience of negotiating distribution agreements with European Distributors. In this area being a UK based EU qualified lawyer will be an advantage.
Pensions specialists are becoming a sought after category and we expect this to continue. Given the influx of funds into Wealth Management & Private Banking we expect to see this trend continue.
We have seen increase in hiring here centering on UCITS funds and Corporate Governance with again experience in European funds an advantage. We expect to see increased hiring across the sector in the ESG space but as yet have not seen demand for ESG specialists within Legal.
Private Funds Lawyers
With the continued solid business performance from the Private Equity sector, we have seen an increase in demand for Private Funds lawyers both from the PE Funds sector as well as from Practice firms. The US law firms are potentially a source of good candidates, however, compensation levels at these firms can be well into high 6 figures base salary for 2-4 PQE lawyers and hence the move to an in-house role will result in a reduction in salary although total compensation would remain roughly comparable. With Kirkland & Ellis announcing record turnover of $5 bn in 2020 we expect to see increased activity in this sector.
Corporate & Commercial
There is always a constant requirement for candidates in this area, the skill set is very transferable and Commercial Contracts specialists are frequently sought after for interim or FTC roles. Compensation here is not really moving as there is a good supply of experienced Commercial legal counsel.
Leveraged Finance, Restructuring & Debt Finance
We have seen an increase in demand from the Private Funds area particularly in Alternatives and Private Equity as well as Leveraged Finance. Compensation in these areas remains high and with the strong performance of this sector overall we are likely to see increased hiring here going forwards. The pool of candidates is relatively thin here and this is leading to still competition from law firms and funds.
Insurance & Pensions
The Lloyds Insurance Market has continued to hire throughout the past year and has been one of the most resilient sectors. Many within the market have had to adapt to working at home. Areas in demand here include the claims and general commercial contracts.
Within the general insurance sector firms have continued hiring with emphasis on commercial contracts, claims and the digital space including data privacy. Pensions lawyers have also been in demand. We expect to see demand in these sectors remaining steady over the next few months. As noted previously there is a strong drive towards regional hiring in these sectors.
Company Secretarial
Due to Covid-19, recruitment activity for permanent roles dropped in 2020, however activity did continue and is now increasing. Demand for interim or contractors stayed fairly constant and we did see a number of Mat leave cover roles in Q3 and Q4. The role of Company Secretary has been emphasized as vital in expediting the smooth running of businesses, managing board processes and overseeing governance, and compliance therefore their role is definitely classed as ‘business critical’. The work requirements for Company Secretaries have increased over the past few months due to the requirement of having to steer boards through adapting to the current climate and changing the format of AGM’s and board meetings to virtual meetings run remotely presenting a range of challenges to be overcome.
The ability to work from home has been seen as a positive by many Cosecs but some are now quite open to a limited return to the office.
Demand for Company Secretaries who can work on Luxemburg and Dublin registered funds has risen in tandem with the increase in moving assets and funds to other locations due to Brexit. There are a number of junior Cosec specialists now part or fully qualified and this will add to create a wider candidate pool for searches here going forwards. This remains a busy area within the contract side as there are a high number of Mat leave contracts and shorter-term contracts to fill.
Europe
Shift to Luxembourg & Dublin & other EU Cities
For those of us who have recruited in the Far East, Luxembourg is reminiscent of recruiting into the Hong Kong Market in its heyday – Luxembourg like Hong Kong has been attracting the best and the brightest from across the region and is seen by many firms as the entry point to doing business in the EU. Compensation has been on the rise in Luxembourg and there has been a noticeable increase in the number of job openings and candidates do tend to have one or more offers to select from and the competition for talent is becoming more intense. This is likely to increase as firms feel the pressure of Brexit and need to shift businesses and allocate resources to Luxembourg and other EU cities. Within Legal Luxembourg and Dublin stand out and we expect to see more legal hiring in Frankfurt as banks shift trading books and resources there.
Within Luxembourg the demand for legal associates remains high as does the demand for French and Luxembourgish qualified lawyers. Languages are at a premium and we are finding a number of multi-lingual EU citizens relocating to Luxembourg to study Law and then get on the path to qualify as a lawyer or work as a legal associate. We have seen some signs of EU lawyers relocating from the UK back to the EU but equally a number who are remaining in the UK and seeking to capitalize on their language skills and qualifications as the UK FS industry adjusts to the new normal of post- Brexit Regulations. As we have noted in the past Amsterdam continues to work hard to attract foreign banks and asset managers and this is a trend we expect to continue. Asset Management firms typically now look to Dublin / Luxembourg when hiring in the UK & it is an advantage for candidates to have some exposure to UCITs & Corporate Governance rules in those locations.
Contract, IR35 & overseas working
The contract market has remained buoyant as firms take advantage of the flexibility this offers them. The change in IR35 rules means has resulted in a shift towards FTC roles where candidates receive salaries, benefits and in some cases bonuses akin to a permanent employee. Other firms are offering candidates work on a daily rate but via PAYE which whilst still lucrative is not at the level of working through a PSC. One point to note is that firms are no longer permitting contractors to be based outside the UK & working remotely. This is for tax and other reasons. We have noted a downward pressure on day rates as more firms seek to bring in contractors on FTCs or convert existing contractors.
Compensation levels
Base salaries have remained largely unchanged during the past 6 months. We are seeing an increased demand for candidates in a number of sectors and this may start to push salaries upwards for the best candidates. Bonuses are likely to be highly varied with some firms e.g. Lloyds Banking Group having announced that bonuses will not be paid across large sections of the firm. It will be interesting to see how the bonus round plays out. Other areas for example Private Funds & Private Equity have performed well and we expect to see bonuses up or on a par with previous years. As noted salaries are likely to continue to rise in Luxembourg.
Private Practice
Private Practice
The latter half of 2020 was a busy time for most City and Global law firms. We saw how technology and Lawyers came together to truly amplify their client service experience during the pandemic. During the first lockdown, many firms acted by freezing recruitment. However, this has changed and we are now seeing legal recruitment within Private Practice is as busy as ever.
We anticipate the upward swing in recruitment levels will continue throughout 2021, with many candidates returning to the market after postponing plans to make a move in 2020. While certain practice groups are busier than ever, others are still recovering from the setback.
We predict Restructuring & Insolvency to remain a popular area of movement, with demand of lawyers with mid-level experience is ever growing. Commercial litigation saw notable movements along with white collar & investigations. Non-contentious areas such as Corporate/M&A have seen a significant drop in movement as firms shift their focus to Contentious areas meeting client requirements. However, the recent spike in demand for Private equity, Funds and Investment Lawyers will continue in 2021 as the sector itself is getting back to business as usual.
Several firms are boosting their presence in European countries in particular, Luxembourg, The Netherlands, Germany and France post-Brexit providing opportunities for UK lawyers to seek experience and promotions abroad. Additionally they will be seeking to hire locally qualified lawyers and associates to service their European client base. In the UK well known names like Clyde & Co, Bryan Cave Leighton Paisner, Addleshaw Goddard, Simpson Thacher & Barlett have announced their expansion plans to compliment presence in London.
Compensation
US law firms continue to lead the way in terms of profitability and compensation levels, however city firms are catching up in bidding war for top talent. Many City firms are now offering NQs starting salaries in the £90-100,000 range and we expect to see continued upward pressure on salaries in the £120,000-£150,000 range.
Moving in-house –
Many Private Practice candidates remain open to moving in-house with key considerations being the timing of a move 2-4 PQE or later with consideration given to title and level of base salary on moving in-house. Work life balance and a desire for a more rounded experience are key drivers here.
Despite the remaining global uncertainty, retaining and hiring top talent during turbulent times is a key component of success, with firms starting to look to capitalise on those performing above & beyond and adapting innovative ideas to enhance client service experience during the era of virtual business meetings.
Looking Forward: 2021 Q2 Snapshot
- Increased hiring in Legal as Brexit unfolds as firms unlock headcount and revisit hiring plans that had been put on hold in 2020. This will likely accelerate with the continued success of the vaccine program and the general move to reopen the country.
- Sectors in demand: Markets, Structured Products, Leveraged Finance, Re-Org, Corporate & M&A, Insurance, Litigation & Employment, UCITS & Private Funds, ESG specialists, Collateral Management & Prime Broking, Payments & Digital, Cosec.
- Return to the office but on a limited basis as noted above with an increase in more flexible / remote working.
- Compensation – base salaries will remain flat, bonuses are expected to be increased in some areas that have performed well e.g. Private Funds whilst they will be flat or lower across banks and larger institutions.
- Europe will continue to grow as firms shift hiring and resource allocation to Dublin, Luxembourg, Frankfurt, Paris & Amsterdam for some sectors.