Huge salary hikes over the past two years have seen law firms gain the upper hand over financial institutions in the battle for finance lawyers, research revealed this week.


A report by recruitment consultants Hughes-Castell found that, as law firm salaries have risen, in-house positions in banks and investment houses are no longer as attractive to solicitors.



The past two years have seen fierce competition for talent between top City firms and investment banks, according to the report - with solicitors with between five and seven years' post-qualification experience (PQE) the most highly sought. There has been universal demand by banks for all types of debt and equity, capital markets, derivatives, regulatory and compliance expertise.



While law firm salaries have risen steeply, banks have refused to raise their base rates and have used bonuses to lift compensation instead, often paid in stock. This has proved less attractive to solicitors, particularly in the current uncertain climate.



Lawyers below partner level can still earn more overall at investment banks, however. Last year, a corporate finance solicitor with six years' PQE typically earned £162,000 in total compensation at an investment bank, compared to £132,000 in private practice. But the typical base salary at a law firm was £110,000 compared to £98,000 in-house.



Brian Littleton, head of in-house recruitment at Hughes-Castell, said: 'The five- to seven-year PQE bracket is the next generation of partners for firms, and it is also the traditional entry level at the banks. Last year, people at this optimum level were receiving three or four job offers.



'At seven years' PQE you can be a director in-house on £100,000 to £105,000, or you can be a law firm partner on £130,000 to £150,000 - and that's guaranteed. At a bank, you might get a 100% bonus, but you take the risk. Generally, the uncertainty with bonuses means the in-house roles are no longer as attractive. Solicitors are likely to be more cautious now and take the more risk-averse option, which means private practice.'



Rachel Rothwell