The legal recruitment market continued to be very active through the end of Q4 and this level of activity continued into January. It remains a busy market for in-house roles. Private Practice has begun to see a cooling in demand across several areas due to the reduction in deal flow driven by the key primary markets and also M&A.
Private Practice
The hiring spree that leading US and Global Law firms went on for the past 2 years has slowed dramatically.
There are higher proportions than ever of candidates looking to move in-house. Most practices are reporting a decrease in the volume of work coming from clients, which is prompting more candidates than ever to consider in-house opportunities.
Investment Banking
Demand for Banking lawyers has continued to be consistent with the following areas still sought after:
- Prime Brokerage
- Derivatives
- Structured Finance
- Regulatory
- Litigation
- Securitisation
- Credit Derivatives
We expect to see a resurgence in demand for Regulatory lawyers as the UK continues to review the Regulatory framework shared with the EU across Financial Services.
Private Banking & Wealth Management
There has been increased hiring for Lawyers within this area including Funds structuring and Distribution as well as Regulatory. This continues to be a key area of growth for many UK and offshore-based firms we expect to see more demand for Legal Counsel, Paralegals and Company Secretaries in this space going forwards.
ESG
The demand for ESG lawyers has plateaued somewhat as firms have in general made key hires in this area over the past 18 months and are now bedding down hires and establishing key working practices. This will remain an area of demand going forwards and there are still many lawyers seeking to move careers into this area.
Investment Management
Demand for Public funds lawyers has remained strong with UCITS experience and exposure to the Luxembourg / Dublin markets particularly sought after. Most UK-based firms now have established presences in either or both of these locations as platforms for European business. Demand is strong for both funds structuring and distribution experience as well as experience with IMAs. As we have noted previously several Investment Management firms have begun the process of hiring stand-alone Regulatory legal counsel and we expect to see this trend continuing. There is a shortage of legal counsel with UCITS experience, particularly in the lower PQE ranges and a large number of Investment Managers have continued to offer training contracts we are beginning to see an increased number of NQ – 3 years in-house qualified lawyers.
There does seem to be a retention issue here for many firms as once qualified in-house several NQs start to seek new roles. The key drivers behind this are 1. Compensation as very often the base salaries are not increased in line with market levels and 2. Role content.
Demand has remained strong for private funds legal counsel, however, the talent pool is much smaller and firms have a lot less choice in selecting candidates for roles in this space.
Private Equity & Hedge Funds
There has been quite a lot of movement in the PE area, and we have seen demand remain strong for experienced private-side M&A lawyers. Funds can offer attractive compensation packages with transaction skills being highly prized. Demand for Lev Fin and CLO lawyers has lessened compared with the start of 2022.
Hedge funds have been seeking Markets / Infrastructure lawyers with a Derivatives background as well as Paralegals in this space.
Insurance
The Insurance Market has continued to be active during 2022, and demand has been strong for Litigation and Claims lawyers as well as more general Corporate / Commercial Legal Counsel.
Amongst the general insurers there tends to be more openness to flexible working, and they offer the chance to candidates to work across multiple locations.
Company Secretarial
This is still a busy market but with a higher demand for mid-level roles compared to the senior hires that dominated the market last year.
Candidates are still demanding higher salaries, but budgets have tightened up from the salary wars we saw last year.
About 50% of roles are newly created or “first appointment” roles, which demonstrates it is still a growing market this year. Clients’ top preferences are for relevant qualifications, candidates from competitors and experience handling demanding boards.
The top reason for candidate movement is progression. Candidates have also reported tight budgets preventing new initiatives from taking place and preventing departments from evolving as another reason to consider a new opportunity.
Candidates are looking for established teams to join after experiencing high staff turnover and picking up additional work has left many feeling stretched and burnt out.
Paralegals
One of the fastest-moving markets, with candidates eager to move for higher salaries and better opportunities to support qualifications.
Over 50% of paralegals are now taking or considering the SQE exams as the fastest route to becoming qualified.
The life scan of a paralegal is becoming much shorter and hiring managers are struggling with the demands from candidates.
We are seeing a new generation that believes 12 months in a company is a long time!
Europe
Dublin and Luxembourg continue to be very active in terms of the legal market including Legal Counsel as well as Company Secretarial. Demand for Funds Lawyers has continued to be high in both locations. This has created a shortage of qualified legal counsel and paralegals in this market, particularly in the areas of fund set-up. The Luxembourg market continues to grow with a demand for Luxembourg or French qualified Lawyers strong. The Corporate Associate market is also very active in Luxembourg.
Flexible Working / Back to the office
Most financial services firms have now settled into a pattern of flexible working arrangements. Within this, there are considerable variations in flexibility. Several US firms are requiring employees to be back in the office 4 or in some cases 5 days a week. Others are adopting a more flexible approach with 2-3 days a week in the office becoming the norm across the industry. There remains in general a strong pushback from candidates for firms with more restrictive working-from-home policies. This becomes more pronounced when we look at candidates from law firms who are considering an in-house move as in many cases this is strongly driven by a desire for more of a work-life balance.
Regional vs London based roles
There has been a pronounced drive by several larger banks to have more employees based in regional hubs. These tend to be centered on: Birmingham, Manchester, Edinburgh or Glasgow. For some areas of legal, there is a preference to hire in these areas over adding more headcount in London. This has created shortages of candidates in a number of these markets and we have begun to see compensation levels sharply increasing in line with the higher levels of demand, particularly at the AVP level. Several law firms have taken action to increase base salaries to bring Associates Compensation more in line with the salaries on offer for in-house roles in response to this.
Given that many London-based roles are now offered on a 2 – 3 days/week in the office model an increasing number of candidates based in regional locations are open to taking a London-based role travelling in on 2 – 3 days a week.
Compensation –
During 2022 compensation has continued to cross the board for Legal Counsel, Paralegals and Company Secretaries in Financial Services and Private Practice.
In – house
Base salaries increased by 20 – 25 % YoY for most areas with candidates being able to move for large salary increases, particularly in the AVP / VP space.
Areas in the most demand were Investment Funds, Derivatives, Company Secretarial
We are waiting for the 2022 bonuses to be announced this quarter, but all initial indications are that bonuses will be reduced or at the same level as the previous year. GS has led the way in announcing a range of cost cuts and staff reductions and other firms are likely to follow suit.
Private Practice
The Global Leading Law firms have massively increased base salaries with the US firms, in particular, having increased compensation levels with some mid-level Associates having base salaries over £200 K in particular market areas: Structured Finance / Lev Fin / M&A / Capital Markets / Funds
NQ salaries are now generally at the 100 K level with some firms paying more into the mid 100K range for 1-2 PQE.
We have already seen several US law firms begin to reduce staff due to the slowdown in the Tech IPO markets which has been unprecedented. Law firms have increased fixed costs dramatically and we are seeing a reduction in hiring it is likely that compensation will no longer be increased.
Most practices are reporting a decrease in the volume of work coming from clients, which is prompting more candidates than ever to consider in-house opportunities.
This will have a knock- on effect the in-house market as we will begin to see more candidates open to moving from law firms and they will be more receptive to the comparatively lower base salary levels on offer.
Looking ahead
The outlook for Q1 within the legal area is one of continued demand within the in-house area albeit at a reduced level from 2022. Several banks are continuing to hire and demand key hires in growth areas that will remain strong & there will be several replacement hires. We expect to see more candidates from Law firms as business levels decrease and Associates begin to review their career plans.