Nick Fear – manager at BCL Legal’s Midlands team – discusses the improvements in the corporate market in Birmingham and across the West Midlands
BCL Legal has the largest team of recruitment consultants focussed on placing solicitors in permanent roles in Birmingham and the West Midlands. As a result, we are fortunate enough to enjoy preferred supplier status with every major law firm in the area. This has placed us in a unique position as we are able to accurately track trends and demands in every sector.
One of the ‘boom’ disciplines is corporate, and since 2013 we have catalogued an increase of nearly 600% in the number of instructions that we have received regarding positions that are suitable for corporate solicitors. This explosion in demand comes off of the back of a stronger economy, but there are other factors which we’ll explore in this piece and we will also analyse what it means for the future.
Improvements in the West Midlands market.
Looking around Birmingham and across the West Midlands it is easy to see visible signs of an improving property market. There is lots of building work going on and cranes dominate the skyline. By contrast, however, signs of the ‘recovery’ in the corporate market are harder to spot and less tangible but, never the less, they are there for those who look.
Increased confidence in the economy, the loosening of the banks’ purse-strings and exploration of alternative financing models have all lead to an improving corporate marketplace. Towards the end of 2014 the Telegraph reported that Birmingham had seen a 4% rise in the number of new start ups. At the end of last year the Express and Star reported a 3% increase in new start ups across the West Midlands region but also a similar increase in the number of businesses closing down.
The majority of this movement is at the owner managed business and SME end of the market. This is good news for the region as they are the types of businesses that are most coveted by law firms seeking to do work within the local market.
It’s important to note that whilst strategic and opportunistic growth dominates the market, there are also those that have survived the recession, returned their businesses to profitability and are looking to now offload; as Fiona Boxwell, corporate services associate at George Green LLP, notes: “We have had a very busy and successful twelve months and given the growth in the market we see numerous opportunities for future growth.”
The increased volume of deals is borne out by the fact that Gateley Plc - a Birmingham headquartered firm - leads the Experian Corpfin M&A Advisor League Tables (both nationally and in the Midlands) for the number of deals completed in 2015. Tom Durrant, partner in the firm’s Birmingham office and national head of Gateley’s corporate team, commented: “As a firm we are committed to providing a down to earth, solutions based and commercial service, in order to deliver the best quality work for our clients and the local market.
He added: The strengthening of the region’s corporate market, alongside the teams’ ability and specialist knowledge in a variety of sectors has allowed it to grow into one of the largest corporate teams in Birmingham.”
There has also been particular movement in certain sectors as small businesses have sought security in mergers and private equity investors in order to grow their portfolios. Nowhere has this been more evident than in the healthcare and veterinary sectors.
So, the picture is rosy in the West Midlands with work on the up. However, there are challenges abound for firms: the sharp increase in work obviously leads to increased caseloads for the region’s corporate solicitors. This means potentially longer hours and greater pressure. Naturally, for many firms, the reaction has been to try and recruit. This task has not necessarily been easy given the low numbers of corporate solicitors who qualified during the recession and the massive increase in the number of opportunities available. In some cases we have heard of situations where fee earners from other teams have been press ganged into doing corporate work in order to help pick up the slack.
The flow of work out of London.
In addition to improvements in the West Midlands corporate market, Birmingham firms have consistently demonstrated the ability to compete for work in London. Increasingly price sensitive clients are willing to explore the option of using solicitors based outside of the capital, recognising that they can receive a comparable service for a fraction of the cost. One manifestation of this was Hogan Lovell’s decision in 2014 to open a satellite office in Birmingham. This was - in part - at the behest of its existing London based clients who asked the firm to find ways of reducing their legal bills.
Alan Greenough, who heads up the Hogan Lovells Birmingham office, commented: "We are very pleased with the decision to locate our Legal Services Centre in Birmingham. We have achieved all our targets in the first year of operation and have plans to increase significantly the number of lawyers in the Legal Services Centre in 2016.”
The attraction for local solicitors in working for such a well known brand and undertaking the very highest quality work for FTSE 100 listed businesses is fairly obvious and as a result in little over a year Hogan Lovells has added four corporate solicitors and a paralegal to its team in Birmingham. Further growth plans continue which puts pressure on a marketplace as there is already considerable demand for talent. The strategy is clearly working for them and we can well imagine that it will only be a matter of time before other firms think about opening offices in the city.
However, this trend is not just limited to new entrants into Birmingham. Several more established Birmingham based teams are also pushing their ability to service London and international based work. This push is particularly focussed on the mid-market where the lower charge out rates of Birmingham teams can help to make the whole proposition very appealing.
Wragge Lawrence Graham and Co’s corporate team is a prime example. As one of the largest teams in Birmingham it has an impressive number of solicitors in the team who are able to offer a very comprehensive service. When this is put alongside the availabilities of formidable real estate, employment, pensions, banking and other complementary teams it is not hard to see why clients would be comfortable putting their trust in a team based outside of London. As Baljit Chouhan, partner in the corporate team at Wragge Lawrence Graham and Co, said: "We have built our Birmingham practice based on providing a cost effective alternative to magic circle firms, whilst still having the size and capability to service international transactions.”
This trend is echoed in the activities of other large international firms in Birmingham and as a result the city is seeing an increasing flow of high quality corporate work. As teams get busy, they need to get bigger. This has resulted in a glut of junior level positions being created and filled. However, securing the services of solicitors (below partner level) who are sufficiently experienced and skilled to run some of the deals remains particularly challenging.
Other opportunities for corporate solicitors.
If all the corporate teams in the West Midlands are busy and have the opportunity to grow, where have all the senior and principal associates gone?
Well, there are likely to be significant opportunities for associate level solicitors to progress in private practice over the next couple of years as increased work and billings makes it easier to create a business case for directorship or partnership. Against that backdrop, recruitment into in-house legal teams has increased significantly in the last few years as my colleague, Victoria Moore - head of BCL Legal’s in-house Midlands and South West division – explains: “The in-house legal market has grown considerably, with the number of lawyers working in-house doubling in the last 10 years. This has led to both a greater demand and more opportunities for experienced solicitors who have a range of specialisms within the commerce and industry sector.”
Many businesses in the West Midlands have bolstered their legal teams and crucially many of those recruits have moved away from private practice. Following a fairly sustained period of recruitment activity, the number of commercial contracts specialists still looking for an in-house position has diminished. In turn, many in-house teams having been giving significant consideration to appropriately skilled corporate solicitors for a while now. For some corporate solicitors the more consistent hours that are often associated with in-house roles have proven to be particularly attractive and have tempted them to make the move.
Further challenges for law firms in the war for talent have come in the form of new entrants to the market. KPMG and PwC have both bolstered their legal offerings this year by hiring corporate solicitors into Birmingham. Whilst their strategies differ, both have the same essential plan to offer clients: a comprehensive accountancy and legal service under one roof.
Interestingly, it might be that the impact of this will be felt by law firms far more in recruitment terms than in work terms. Conscious of maintaining relationships with law firms, instructions will still be passed on high value mergers and acquisitions.
The final question is: Why should accountancy practices entering the market be a challenge for law firms recruitment wise?
Well, at first glance, the business model is not too dissimilar to the large legal practices, so most solicitors naturally understand it. However, culturally there seems to be some fairly major differences. For example, salaries are higher and benefits packages are even more complete than in the largest of law firms. Also, there does not seem to be the same ‘long hours culture’. One candidate of ours recently spoke about being: “shown around the offices at 6pm and being shocked to find that they were almost empty of people.”
When this is combined with the chance to continue doing corporate work (rather than moving across into commercial – as is often involved in going in-house) the appeal becomes even more obvious. Who wouldn’t want to get paid more money to work fewer hours, whilst still being involved in the area of law they enjoy the most?
The reality is that an already challenging recruitment market for law firms has been made more difficult by the other types of opportunities. The recession had naturally restricted the number of qualified corporate solicitors between 2007 and 2012. A number of those that were in practice have now been tempted away, which is creating clear gaps and opportunities in the middle of private practice teams.
Whilst confidence remains buoyant in the West Midlands and teams continue to win work in London, the life of corporate solicitors is likely to remain busy. Most of the firms in the region have a good supply of partners and juniors, but mid-level solicitors are in increasingly short supply. In meeting this challenge, most teams are being reasonably pragmatic and building from the bottom upwards. This approach is providing some fantastic opportunities for junior solicitors as they are able to work very closely with partners on some good quality work and promotion opportunities are in healthy supply.