Finance

Magic Circle’s record partner numbers show push to keep stars: ‘Good people could get poached away’

London’s Magic Circle law firms have promoted record numbers of partners in 2022, amid surging demand for legal services and fierce competition for talent.

The five firms that make up London’s legal elite — Linklaters, Freshfields Bruckhaus Deringer, Clifford Chance, Allen & Overy, and Slaughter and May — promoted 152 partners globally in 2022, which was a leap of more than 25% from the same period last year, an analysis by Financial News found.

Insiders and experts say the boom in promotions was partly driven by a strong run in M&A last year, sending demand for transactional and financing work sky high. The explosion in workload created a hot market for talent, pressuring UK firms to retain and promote rising stars and amp up salaries for juniors to as high as £160,000.

Women have climbed the ranks at record levels, too.

It is an “extraordinary market where activity levels suggest demand for legal services is going to continue to rise”, said a partner at Freshfields, which promoted a record 27 lawyers to partner in 2022.

“The ‘jam tomorrow’ line won’t keep people with you and motivated if they are getting calls saying, ‘Why don’t you come and join us?’” said Tony Williams, a law firm consultant at Jomati Consultants.

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A partner at Linklaters — which promoted an all-time high of 41 new partners this year — echoed this sentiment: “Your good people could get poached away. There is a need to make people up or you could lose them,” especially in private equity,

Clifford Chance’s 37 new partners were its most since 2007. Partner Emma Folds, who is chair of the firm’s partnership selection group, said this reflected the firm’s success. At A&O, 39 were promoted to partner, the highest number since at least 2008. In London, partner promotions among the big five jumped by a third to 60.

Legal sector confidence

The top firms have largely emerged from the pandemic in good shape. Profitability grew as the flurry of global M&A dovetailed with a reduction in expenses thanks to travel curbs.

Clifford Chance boosted average profit-per-equity partner by 9% to a record £1.85m in the year to 30 April 2021, while Linklaters upped its average partner profit almost 10% to £1.77m during the same period.

The latest financial year, which ended on 30 April 2022 for the Magic Circle firms, was also a good one, partners say, with firms expected to report buoyant results soon.

This year’s revenue will be up, said one Magic Circle partner.

“It looks as if they have had a robust year,” Jomati’s Williams told FN on 3 May.

That confidence contributed to the bumper partner crop in 2022 as firms made promotions amid continuing demand for legal services and on the back of a strong run of results.

“There is an opportunity out there and everyone wants to grab it,” said a second Linklaters partner.

Retaining talent

The bumper partner promotions round at the Magic Circle this year reflects a wider push to reward and secure talent, a key priority in the legal market over the past 18 months.

Last year, law firms struggled to keep top legal stars in their seats — despite the lucrative rewards on offer. Recruiters, law firm partners and junior lawyers told FN in October that City firms found it difficult to retain staff, who in many cases left the industry altogether.

One US law firm partner quipped at the time that major London players are hiring “anyone with a pulse” to fill the gaps in their ranks.

The talent war is raging on. Similar to other fields where labour markets have tightened and workloads have soared, legal firms have seen competition for junior lawyers surge.

READ Hot hiring market for London lawyers continues into 2022 despite M&A slump

And pay is rocketing — Freshfields upped pay for its newly qualified lawyers to £125,000 last month. US firms have gone even higher — Morrison & Foerster last month upped pay for its NQs in London to $215,000.

The hiring frenzy also fired up this year’s record partner promotions as firms sought to hold on to their homegrown lawyers.

“It is protecting your talent pool,” said Jomati’s Williams. “Rather than telling people they have to hang around, if you are happy they are good quality people, it is: ‘Let’s give them the message now.’”

Legal market confidence is still intact, with hiring in the first quarter continuing to be strong, according to figures from recruiter Robert Walters, despite a drop off in M&A work.

A record for female partners

The Magic Circle firms also promoted female partners in record numbers this year. Women made up 38% of the newly promoted partners at Magic Circle firms in 2022, accounting for 58 out of a total of 152 promotions, a record overall figure.

Last year, a similar proportion of women were promoted by Magic Circle firms, as 48 female partners rose to the rank out of a total of 121.

Female partnership is on the up. In 2017 there were only 19 female partners promoted across the Magic Circle, representing 19% of the 99 total promotions that year.

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In 2016, the firms promoted 23 female partners out of a round of 96 — just 24% of the total.

Clifford Chance promoted 15 women out of 37 (41%) this year, Linklaters 17 women out of 41 (41%), Allen & Overy 14 women out of 39 (36%), Freshfields 11 women out of 27 (41%), and Slaughter and May promoted one woman out of eight new partners (13%).

Claire Wills, London managing partner at Freshfields, said boosting diversity in its partner ranks was a major priority.

Freshfields, for example, said last year that it wanted its new partner cohorts between 2021 and 2026 to include at least 40% women.

Siobhán Lewington, managing director at legal recruitment firm Fox Rodney, said the strong showing for female partners was evidence that these initiatives were bearing fruit.

“It shows that the firms are really trying to change the composition of their partnerships,” she said.

But some question the long-term sustainability of this legal boom. With fears of an economic downturn growing as rising energy costs stoke inflation, it is unclear if 2022’s bumper promotions will be repeated.

One of the partners fretted: “What will happen if there is a recession? Who knows?”

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To contact the author of this story with feedback or news, email James Booth

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