Booming Brum

Second city or front runner? Birmingham is a city that has survived by constantly adapting to changing times - an attitude echoed at the heart of its current legal scene

Birmingham.

UK's Berlin, if the professional community here has anything to do with it.

'I am expecting to rule the Third Reich from here,' jokes Eversheds' Birmingham senior partner and commercial property lawyer Adrian Bland.

Like Berlin, Birmingham is being rebuilt.

It is a city that has been much maligned as a concrete jungle.

But the building work that is going on all over the city anticipates a spanking new image for the heart of the Midlands' capital.

Birmingham's top law firms are dotted around the old cathedral square, which is also being dug up.

Birmingham firms Martineau Johnson and Wragge & Co have a particularly good view of the exhuming of plague victims' graves, although Wragges seems to have escaped the vibrations, which gently shake lawyers at Martineaus.

Birmingham has a long industrial history an the decline of manufacturing and the car industry has hit the local economy hard, although it would still be difficult for any law firm here to ignore the local client base.

The Wilkes Partnership is celebrating a win of more Avis work, and Rover and BMW still provide substantial work for Birmingham firms.

But there is a change.

Technology companies such as 3i are coming to town, hiring top firm Wragges in place of Lee Crowder, and professional services are growing.

Wragges partner Richard Haywood says: 'Manufacturing has taken a battering, with the high value of the pound, but we still act for manufacturers as well.'

And Hammond Suddards Edge is stepping up local pitch activity after three years absence from the scene as Edge Ellison got into shape for merger.

After its June wedding to national firm Hammond Suddards, partner Paul Cliff says the firm is seeking to win Midlands-based clients, which still count for a significant part of the local economy.

He argues: 'It is still a challenge for Birmingham law firms to get more local companies to take their advice from Birmingham firms.'

But the squeeze on industry has had a knock-on effect on the professional advisory community.

DLA's Birmingham managing partner, Chris Rawstron, argues: 'The local manufacturing base was not big enough.

Firms had to look to London and internationally.

That will continue.

At the same time the professional community is becoming an increasingly important part of the local economy.

Birmingham constantly reinvents itself.

It is attracting much better quality recruits and the city has made a large investment in its infrastructure.'

Hammonds' consultant John James, who will head the College of Law's new Birmingham branch when it opens next year (see interview), takes a stark view: 'Birmingham is a city that is driven by the professions,' he says.

Mr James is also chief executive of Birmingham Forward, an organisation that promotes the area's 90,000 financial and advisory employees.

And anyone who is anyone in the Birmingham legal community is involved in the group.

For example, Mr Bland is taking over as chairman next year and Pinsent Curtis partner John Pratt is chairman of its education and learning committee.

'One office' Birmingham firms Wragges and Martineaus have both opened London offices in recent months, reflecting a shift in emphasis for Birmingham-based firms.

But both firms insist the offices are limited.

Martineaus hired Edge partner Helen Leeson to lead a London office, which opened in August.

She brought some Lloyds TSB work with her, to add to Martineau's existing Lloyds TSB files.

Martineau's managing partner David Gwyther says: 'We see ourselves as one firm operating from two offices.

London is not going to affect the overall strategy and ethos.'

Full service corporate law firm Martineaus has, like Hammonds and Shakespeares, gone for a sector-based approach in recent years.

But Martineaus also restructured its equity partnership in December, introducing fixed share partnerships, which reduced the number of equity partners from 23 to 15.

Equity partners now bill 2,500 hours a year, while fixed share partners have a 2,000 billable hours target.

This was a big achievement for the firm because of its executive board's well-known unanimity policy.

Wragges now has offices in Brussels and London, following a merger with intellectual property practice Needham & Grant.

Rivals are watching the firm keenly, citing it as the most likely contender for a US merger given its location and high profitability, although Pinsent Curtis has also been linked with US names.

Mr Haywood insists Wragges has no plans to go 'gung ho' in the capital: 'We have no current plans to go full service in London.

We may add on if a business case develops and clients want us to.'

These and other firms increasingly looking outside Birmingham for new business.

For example, 65% of Wragges' work now comes from outside Birmingham and it is attracting national clients such as British Airways.

National firms DLA, Eversheds, Hammonds and Pinsents are all in the market for corporate management buy-out and buy-in work, but there are some fundamental differences in their strategies.

For example, DLA has one profit centre, while Eversheds shares profits locally.

Like Hammonds, DLA is ploughing cash into building its Birmingham office, determined to carve itself a larger market share and hopes to number 350 people by 2003.

But Mr Rawstron, is reluctant to assess how far the firm has broken in to the market: 'It depends on how you define "cracked it", 'he says: 'We are not the same size as Wragge & Co, but we are a different proposition to most of the other firms in Birmingham.

The nearest firm strategically is Eversheds, therefore we are part of something very different because we are an international and national firm.

We don't have to be big in Birmingham to be pre-eminent.'

Birmingham firms have been chipping away at the mergers and acquisitions market, attracting corporate clients by having lower charge-out rates than those of the London firms.

Midlands partners command hourly rates of between 80 and 300, compared with 100 to 500 in London.

But there is still little likelihood of the pre-eminent Birmingham corporate finance firms breaking London's magic circle monopoly on lucrative merchant bank work.

London firms are still the first choice for capital markets work and mega-corporate transactions, such as hostile take-overs.

'I don't think you will find many magic circle firms looking over their shoulders at the Birmingham firms,' says a wry Mr Pratt.

But Mr Bland is more optimistic on the corporate front, arguing that although merchant banks continue to hand work to 'pet firms', companies are increasingly questioning whether they need to go to a magic circle firm for a particular job.

Birmingham is held back by its lack of a strong investment bank community, argues DLA's Chris Rawstron, and many lawyers agree the best thing for Birmingham would be for one to set up here.

In addition, London salary rises earlier this year have increased pressure on Birmingham firms to recruit and retain.

But Shakespeares managing partner, Andrew Argyle, insists it is two-way traffic.

Lawyers might have to take a cut in pay, he argues, but overheads are cheaper and there is a life-style and quality of work pay-off, coupled with good promotion prospects at some of the smaller firms.

Both Shakespeares and the Wilkes Partnership have slimmed down to improve the partnership track.

The trouble is, it is a two-way flow.

'It swings and roundabouts,' says Mr Rawstron: 'As many people as Birmingham gains from London, it loses to London because a lot of the young lawyers head down there.'

Compared with London, the Birmingham legal community is much closer, and packed in to a tight area.

The result is a friendly but competitive scene.

'People can generally have a bit of a laugh about [the rivalry],' says Mr Bland; 'I can have a laugh with [Wragges partners] Quentin Poole and John Crabtree.'

Mr Argyle agrees: 'There is a lot of competition between the firms.

There is poaching and headhunting, but we all know what the rules are.'

On that front, Hammond Suddards Edge has caused a stir with its campaign to hire 100-odd lawyers, to replace lawyers shed in the course of its merger.

It has retained headhunters to bring in the partners to which it is offering 'top whack', while it is hoped that advertisements will bring in the assistants.

Rivals are wondering where Hammonds expects all these lawyers to come from.

'I got an e-mail this morning,' says one partner: 'It's got to the stage where people are wondering what's wrong with them if they haven't had an approach.'

Mr Cliff is keen to emphasise that the merged firm is serious about growing in Birmingham.

'I genuinely believe that Birmingham was just as important to them as London.

Our commitment is to grow in Birmingham,' he says.

There is a strong sense of solidarity, despite the rivalry.

When Martineaus was conflicted out of Pheonix's bid for BMW-owned Rover, 'we were pleased to see Eversheds brought it home', says senior partner, Michael Shepherd.

And the firm's managing partner David Gwyther drove home the point: 'It was important that it stayed in Birmingham.'