London has a serious chance of being the world centre of global finance by the end of this decade.

A crucial role in achieving that objective will be played by our commercial law firms whose reputation matches that of any competing centre in the western world.The Corporation of London, which is dedicated to promoting the success of the financial and commercial City, has sponsored a three-year study by the London Business School to facilitate a greater understanding of the competitive threats and opportunities affecting business carried on in the Square Mile.

One of these studies, to be launched in the next month, looks at the competitive advantage of law and accountancy in the City of London and has been researched and written by John Kay of London Economics.It shows that the combined annual turnover of the 20 largest City law firms is approximately £1.6 billion.

Their market is truly international.

They service global banks investors and traders both from overseas offices as well as from their headquarters in the City.To be successful in this market the firms concerned need to develop a reputation for quality and a capability for dealing with complex financial problems.They have one important advantage over foreign competition: English law is still regarded as having the greatest reliability and relevance for commercial transactions based on centuries of mercantile experience.

London has ten out of the largest 40 law firms in the world.

It should be noted, however, that the very large US firms have a domestic focus rather than an international one.

In Europe all of the top ten law firms are UK based.But size is not everything.

The largest 20 firms still only account for 10% of the market for legal services and there are more than 80 firms in the capital with fewer than 25 fee-earners.

Some of these are niche players in the international market.

Firms specialising in shipping work, for example, tend to be in the smaller category.There is every sign that commercial firms are well placed to build on the successes of the recent past and the Corporation of London looks to work with them in promoting their services in a very competitive market place.Michael Cassidy.The world market in accountancy is now concentrated in the hands of six international firms.

The market for legal services remains largely national, and is far less concentrated.

Is law different, or is it simply that the legal profession is slow to develop structures appropriate to modern international business?There are at least two important differences between buying audit - still the principal accounting product - and buying legal services.

Audit is an unusual product.

Companies buy it because they are obliged to, not because they want to, and in the main their concern is that it should be adequate rather than that it should be outstanding.

That peculiarity explains why accountancy is dominated by large firms which most people find hard to distinguish from each other.In buying legal services, it is often important to have the best, and small differences in quality may imply large differences in outcome.

That is why the reputations of individual firms and partners are more distinctive and more important.And audit is bought as an integrated, or at least interrelated, worldwide product.

Sometimes this is also true of legal services - as with large international mergers and acquisitions - but mostly it is not.

The leading Anglo-American accounting firms have therefore followed their multi-national clients around the world.

Analogous pressures in law are much weaker.An appreciation of the competitive position of English law firms has to begin elsewhere.

The particular characteristics of English law and the relationships between City law firms and London's role as a financial services centre have created a competitive position different from, and more firmly based than that of many other British providers of either financial services or business services.Professor John Kay.1994