The recruitment market is heaving with situations vacant in key commercial disciplines. Kate Hanley looks at the national shortage of critical skills


There is no doubt that the commercial law market is thriving. In the City, elite firms are posting record turnover and profits; major corporate deals are at last rolling in; billable hours are exceeding targets; and corporate lawyers are being overworked again, poor lambs.



The post-Enron Sarbanes-Oxley legislation in the US has proved that one man’s loss is another man’s gain, as international companies overlook US capital markets in favour of London. What is more, a preference for English legal frameworks globally, and a healthy pound, mean the City is on track for a return to boom time. Elsewhere, the ripple effect is also being felt.



National firms are competing with the magic circle for top-end work, creating opportunities in the mid-market sector for quality medium-sized firms in key cities such as Birmingham, Manchester and Leeds.



The bottom line is that everyone is recruiting. While it is one thing to have the work streaming in, it is quite another to find the resources to service it. ‘There is a huge shortage of staff everywhere at the moment,’ says Nick Root, a recruitment consultant at Taylor Root. ‘The demand is really intense and all non-contentious areas are busy. Supply just can’t meet demand.’



‘The market is very, very buoyant,’ confirms Kelly Barker, a senior consultant at Hays Legal. ‘There is a lot of movement at every level, from newly qualified (NQ) up to partner. Even high street firms are looking.’



While the flourishing economy is the obvious cause, so too is the cyclical nature of personnel planning. Today’s skills shortage is largely the result of a cut in junior opportunities during the economic downturn of 2000/01. Then, many firms were reducing trainee intake and showing their NQs the door, P45 in hand. It is no coincidence that five years on there is a chronic shortage of quality lawyers in the two-to-five years’ post-qualification experience (PQE) bracket.



This level is most in demand across all practice areas – assistants who are experienced enough to be up and running are becoming more client-focused and probably billing very well, while at the same time not yet entering the murky world of partnership prospects. However, too few firms thought of this during cost-cutting five years ago. ‘A lot of firms have not been looking at the long-term picture,’ says Ms Barker.



’Twas ever thus, of course – the same phenomenon occurred in the mid-to-late 1990s following the cutbacks that marked the economic malaise at the turn of the decade.



Also eating into the two-to-five-years’ PQE talent pool is the in-house market – for example, investment banks. One of the most notable trends of the past year is the expansion of in-house legal teams, especially in the financial sector, and two-to-four years’ PQE is the optimum time to make that career move. According to Mr Root, solicitors in private practice at this level – particularly in finance – are enjoying salary increases of as much as 25% to retain their loyalty. Meanwhile, to compete, banks are offering a similar salary and bonuses of up to 100%.



All areas of finance are seeking to recruit in earnest, with the more specialist skills, such as asset and project finance, most in demand. Non-contentious construction is a hot-spot, while corporate is on the up, not so much at NQ level but again, that key window of two-to-five years’ PQE, where deal experience is already there. A spin-off from corporate growth is a demand for competition expertise, while technology is enjoying a renaissance. However, nowhere is the skills shortage more acute than in commercial property, be it London, the regions, or Scotland.



Charlotte Stokes, a director at recruitment firm Hudson who is responsible for the midlands and south, says: ‘The biggest demand for lawyers is in commercial property – you just can’t get enough of them. Anything from newly qualifieds up to salaried partners – there just don’t seem to be enough.’



Admittedly, commercial property lawyers have been in demand for some time – the result of a continued national property boom coupled with too few solicitors choosing the discipline on qualification. To combat the problem, premium salaries are on offer, both to attract lateral hires and retain existing personnel, while savvy trainees are increasingly realising the career benefits of choosing property on qualification.



The most obvious impact of a shallow recruitment pool is pressure on salaries. Basic economics dictate that when demand exceeds supply, cost is driven upwards. ‘In response to this skills shortage, firms are sitting up and thinking about salaries and their whole reward packages,’ advises Ms Stokes. ‘Until recently, firms have been confident that while the market is picking up, it hasn’t picked up enough to raise salaries. But this year, they are either having difficulty attracting staff or are scared of losing existing staff, so they are having to look at salary banding and be more flexible.’



A convenient gauge of salary trends is NQ-level pay. In London, US firms are driving salaries sky high, with increases of up to 20% at this level. Weil Gotshal & Manges is paying its NQ solicitors £75,000, while Debevoise & Plimpton is shelling out a whopping £82,000. Though they will never attempt to match these figures, magic circle firms will inevitably be forced to raise their NQ offering from the current £55,000. Typically, NQ salaries in the regions are £34,000 to £36,000 at leading firms.



But recruitment is not just about salaries, as law firms are slowly beginning to understand. Far greater sophistication in recruitment strategy is needed if they are going to compete successfully for talent, and moreover, retain that talent. ‘We’ve been telling firms for a long time that they need to do more,’ says Ms Barker. ‘Higher salaries, yes, but firms need to offer flexible benefits and demonstrate good prospects. There’s still a long way to go.’



One strategy employed by the top-end of the market is to recruit from overseas. While the employment of Australian and New Zealand lawyers is nothing new, recruitment drives into these markets are being stepped up, and the number of firms tapping into this pool is increasing. ‘The big difference now is that it’s no longer just the magic circle’, says Mr Root.



City firm SJ Berwin has been down under, as have US firms such as Shearman & Sterling and Milbank Tweed Hadley & McCloy. ‘It’s quite a commonly-trod path for antipodeans to come to the UK, work in a well-respected firm for a few years and return home. However, now they are staying for partnership,’ says Mr Root.



The magnetism of antipodeans for UK firms, other than their similar legal systems and English language, is their enthusiasm to gain experience overseas, coupled with a willingness to work hard while they are here. UK firms hold regular presentations in Australia and New Zealand, attend career fairs there, advertise in the local legal and national press, and even send partners down under on recruitment missions. All this is paying off, with the domestic Australian legal market complaining of a brain drain of its young lawyers and fighting back with reciprocal recruitment campaigns for UK lawyers.



Similarly, Canada is the latest target jurisdiction. Scott Gibson, head of the London office at recruiters Hughes-Castell, says: ‘The major firms are sucking in people from anywhere where they are common law qualified, and there is knowledge of specialisms, such as structured finance and securitisation.’



Such is the demand for critical mass at larger firms, that they are recruiting candidates, both at home and abroad, whom they would not have considered in a quieter market. ‘Invariably, we have to pull in people in who are ticking three out of five boxes and they’re having to be trained on the other two,’ says Ms Stokes.



‘The entry level bar will lower if the market continues to grow. Historically, it has always dipped when the market is hot because firms need critical mass,’ Mr Gibson points out.



Candidates from smaller firms or the regions, who previously would not have considered a career in the City – or indeed, would not have been considered by the corporate elite – are being courted by the inflated salaries and the need for hands on deck. This has the knock-on effect of reducing the recruitment pool further for mid-market or regional firms.



In Manchester, John Sacco, partner at recruitment consultants Sacco Mann, describes the local market: ‘At the moment, there is a severe skills shortage, particularly at the salaried partner and senior associate level – people with the capacity to run pretty large deals. There is a critical need for highly skilled and specialist lawyers.’



Echoing London, the hotbeds for recruitment are projects, construction, IT and commercial property. The north-west market is evolving, he explains, as national firms have refocused on more lucrative clients demanding more specialist advice. ‘Traditionally, the nationals could have recruited from medium-sized Manchester firms. But they have progressed to such an extent that it has become much harder to pluck from the medium-sized firms, because they are focused on different clients and specialist areas to ten years ago. There is now a much different breed of lawyer roaming around the streets of Manchester.’



The most obvious solution to the lack of specialist expertise in the regions is to recruit out of London. ‘The successful moves are those who are from the north-west originally and are seeking an opportunity to return home,’ continues Mr Sacco. ‘People who come to our city do tend to put roots down and settle.’ The inevitable reduction in salary is counterbalanced by lower property prices and a less tortuous daily commute.



However, the age-old appeal of a better work/life balance is no longer valid, insists Mr Sacco, because firms are keen to dismiss any preconceptions of second-rate work or a less busy environment.



It is very much a similar picture in the south-west. Bristol, for example, is heaving with national firms and strong mid-sized firms, such as TLT, which together are heating up the competition for good-quality individuals. ‘Firms here are becoming even more diligent in the way they recruit, to avoid the boom and bust cycle,’ says Justin Nott of recruitment consultancy Chadwick Nott. ‘They don’t want good people cut adrift when the work slows down again.’



Trainees are being channelled into practice areas where demand is high, and firms are realising that candidates want quality of work as well as lifestyle. ‘Previously, the recruitment literature of Bristol firms always featured a surfboard, or mountain bike, but now firms realise they need to highlight the quality of work,’ says Mr Nott.



Firms are looking further down the food chain for talent, realising there is good potential at even the smallest firms, and are also advertising nationally to draw candidates from around the country. ‘Fortunately, legal recruitment draws on a national pool of talent,’ adds Mr Nott. ‘Bristol firms will look at candidates from Wragge & Co and DLA in Birmingham, for example, as well as Clifford Chance in London.’



For the countless number of law students unable to attain training contracts, the skills shortage across the country must make frustrating reading. Yet, whatever the strain on resources, firms will continue to ferociously guard a certain level of standards. Far more appealing is the candidate from a top Australian firm with no work permit, than a gamble on a UK applicant with a less-than-flawless education. ‘We have a lot of candidates on our database, but they are just not right,’ confirms Ms Stokes.



Such is the desire for the ‘right’ sort of candidate that loyalty bonuses of several thousand pounds are being paid to existing employees who successfully refer someone to the firm. ‘Word-of-mouth recruitment is increasingly being embraced, particularly for key positions,’ advises Mr Sacco. ‘With good connections, you will quite often come across the person you want to recruit in your daily work.’



Firm Web sites, too, are more advanced, facilitating on-line applications. But recruitment consultancies can breathe a sigh of relief. The Internet is not about to eradicate the need for external agencies just yet, with most lawyers, particularly those higher up the ladder or from smaller firms, still preferring to negotiate a career move through a third party.



Indeed, recruitment consultancies have never been busier, their challenge of filling the burgeoning number of vacant positions across the country not an enviable one. Drilling home the message to firms for the need for open minds and flexibility appears to be key. ‘Firms are being more creative,’ says Ms Barker. ‘Not all the firms have caught on yet, but certainly the better ones have.’



Kate Hanley is a freelance journalist