City feels the squeeze

While the economic slowdown in the US has hit law firms, here city giants worry how tremors from across the pond will affect recruitment.

Victoria Maccallum reports

The chill economic wind that has blown across the Atlantic for months became suddenly frostier last week, with the news of US law firms slashing end-of-year bonuses and encouraging unpaid leave for their staff, suggesting that global economic meltdown may not merely be a tale of the bogeyman.Top Silicon Valley firm Wilson Sonsini Goodrich & Rosati announced to its 600 associates last week that their end-of-year advances would be substantially less than in previous years; moreover, they would also not be getting their traditional August advance on bonuses.The previous week, San Francisco-based Brobeck Phleger & Harrison began to urge its staff to take three-month unpaid sabbaticals or cut down their working to part-time.These events may seem far away, but given that the salary surges seen in the City over the 18 months began in Silicon Valley, their relevance should not be understated.

So, with these ever stronger hints of the real possibility of a recession, one of the most obvious areas for cuts seems to be recruitment.The question now is whether City firms are following their US cousins and tightening their belts, or attempting to weather the storm.

The mixed response of those in the market indicates that even they are not yet sure.'No-one here is panicking,' says Fiona Bennett, a senior consultant in the private practice arm of recruitment consultants Hays ZMB.

'There doesn't seem to be any big meltdown on the horizon, and managing partners in general are looking to consolidate and strengthen rather than batten down the hatches.'She admits that firms are 'not expecting the same levels of growth as before', but stresses that 'we're not looking at apocalyptic crashes'.Despite this generally positive outlook, Ms Bennett readily admits that the recruitment market has slowed down.

'Although the situation is healthy, it's not as healthy as it was 18 months ago, and firms are certainly being more careful,' she says.'There has been a slight decline in recruitment over the last 18 months; back then, firms were so busy that the odd lawyer who wasn't up to their usual standard slipped through the recruitment net.

Whereas in the last few months firms have become more picky, and are demanding top-notch academic and training credentials.'From the firms' points of view, an increase in the numbers of candidates is good news.

Margaret Bradburn is head of HR for the City office of Eversheds, and concurs with Ms Bennett's assessment.

'We do have slightly more candidates applying to us this year,' she says, 'although not masses more.

We are still recruiting the same number of people, and it's become slightly easier for us, but not hugely.'However, there is no consistent message from City firms, for while Eversheds reports only a slight increase in applicants, smaller firms have a different tale to tell.At the other end of the market Ian Rosenblatt, founding partner of nine-partner City firm Rosenblatt, has seen a definite change.

'Over the second half of last year, we've found it much easier to recruit quality people,' he says.

'There are a lot more people on the market because of the looming recession, and the past six months have been easier in terms of recruitment than the past two years.'A spokesman for a 50-partner City firm, which did not want to be named, agreed with Mr Rosenblatt's view.

'We have found the quality of candidates on the market over the past year to have been enormously high,' he said.

Although stressing that certain areas - such as banking and pensions - have traditionally had a shortage of quality applicants, 'in general people have been falling over themselves to apply'.Possibly the reason that large City firms have not noticed changes in the market to the same extent that smaller firms have is down to the different scales on which they work.'Big firms such as ourselves recruit trainees a hugely long time in advance,' says Deborah Dalgleish, head of graduate recruitment at City giant Freshfields.

'People who I am recruiting now won't start at the firm until 2003 and won't qualify until 2005, and none of us knows if there will be a recession then.

Because we have such a big lead- up time, I would need a crystal ball in order to adjust the recruitment.'Also claiming that fears of imminent recession are groundless is Christine Moors, general counsel at British Telecom.

She says: 'Our experience has been of a good field of high-quality candidates and a high level of interest in working in-house.'One sector that has traditionally been a good indicator of a forthcoming recession is litigation, the theory being that in a recession people are more likely to chase their money, hence resulting in a litigation boom.

So far, this does not seem to have happened, and Ms Bradburn at Eversheds sees this as 'very interesting'.'There are still a large number of applicants for our litigation positions, as there has always been,' she says.

'This suggests that the litigation boom hasn't begun yet, which again suggests that there isn't a gloomy economic horizon.'This is a phenomenon that Richard Ziegler, a recruitment consultant at EJ Legal, has also picked up on.

'There are very few litigation positions around in the big firms at the moment,' he said.

'This is partly due to the post-Woolf desire to avoid litigation wherever possible, but it's also definitely a sign that the recession is a long way off.'The areas that have dried up, according to Mr Ziegler, are the newly qualified positions.

'In general, newly qualifieds have got it hardest,' he says.

'It is still a pretty buoyant market for two-to-five years' qualified solicitors, and for specialised areas such as tax, construction and property, but for newly qualifieds it's very tough.'Departments such as corporate, intellectual property and employment are, says Mr Ziegler, 'filled with lots of unhappy people who want to move, but there simply aren't the positions there'.Other lawyers who will be feeling the pinch when the slowdown finally comes will be those working in US firms, Mr Ziegler speculates.

'It will be very interesting to see what happens to the big firms over here who either have no particular focus or are exclusively corporate and commercial,' he says.

'Whereas UK firms will be able to adjust to more insolvency and litigation work, US giants will struggle.'Ms Bennett says that the US firms' recruitment has slowed dramatically from the beanfeast of the last couple of years.

'They are certainly recruiting less than they were 18 months ago - that's partly because of the marketplace, but also because then they were setting up, and needed whole departments recruited, whereas now they are evolving more gradually.'The US recruitment boom of 18 months ago came hand in hand with eye-watering salaries, and began the 'whatever you can do I can do better' school of thinking among City firms, trying to lure bright young things.

This appears to have died down, but the lure of US firms still holds strong for many.'Although obviously the money is tempting for many, the appeal was more about status,' says Ms Bennett.

'For a brilliant young lawyer who wants to be at the top of the evolutionary tree, the US firms are seen as being the best in the world, and they have a far greater kudos than UK ones.'However, one thing that US firms have found it harder to import to this country is their fondness for psychometric testing.

This is a sophisticated recruiting tool, which is designed to measure the individual candidate's different levels of ability, aptitude, and personality.

'In terms of selection procedures, almost every City firm sticks with the classic two interviews with different partners, followed by an informal lunch or drinks,' says Mr Ziegler.

'When recession comes, perhaps they will become more vigorous, but lawyers do tend to be very sceptical about psychometric tests and the like.'It is reassuring to know that whatever the future may or may not hold for City firms - meltdown or lucky escape, economic boom or bust - that in the traditional world of law, some things never change.