Pound’s Brexit Slump Means Higher Pay for Young London LawyersBy
Salaries pushed up as U.S. firms pay dollar-equivalent rates
London’s ‘Magic Circle’ firms follow suit to retain staff
The U.K.’s vote to leave the European Union is having an unintended consequence: higher pay for some of London’s top young lawyers.
The increases for attorneys at Kirkland & Ellis LLP and other large practices come after some U.S. firms decided to set pay in dollars, and then convert it to pounds for distribution to U.K. employees. With the currency’s plummet amid the Brexit vote in June 2016, the Americans had to pay more in pounds, and local firms including Clifford Chance LLP risked losing talent if they failed to follow suit.
“Salaries shot up at the top New York law firms” in London, Daniel Smith, director of the recruiter Noble Legal, said by phone. Local competitors, known as Magic Circle firms, “are paranoid the U.S. firms are hoovering up their best people: they need to bridge the gap” in pay.
The Brexit vote has left companies and politicians scrambling to prepare for the U.K.’s departure from the EU in 2019. Uncertainty about contracts and legal appeals mean lawyers are finding plentiful work to make sure clients aren’t at risk when Britain is no longer subject to EU rules and courts.
Chicago-based Kirkland & Ellis, which has 210 lawyers in London, changed its U.K. pay system in June 2016, just before the Brexit vote. The salaries are converted to pounds every month, which means that pay fluctuates.
Calculations by Bloomberg show that a London-based lawyer earning $180,000, the Kirkland & Ellis rate for newly-qualified lawyers, would have a salary worth 120,992 pounds at the 1.49 exchange rate immediately before the mid-June 2016 referendum result, and 136,106 pounds at the 1.32 rate that it hit by later in the month. Now, that salary would be worth 136,271 pounds.
A spokesman for Kirkland & Ellis said the firm doesn’t comment on pay.
Akin Gump Strauss Hauer & Feld LLP pays newly-qualified London-based lawyers $180,000, at a rate that it converts to pounds on a quarterly basis at the current Bank of England rate.
The pound’s fall, which effectively raised Akin Gump’s U.K. pay, meant that “there is greater quality candidate interest when we recruit and our retention rates have remained stable,” Victoria Widdows, the firm’s director of international legal recruiting and development in London, said by email.
The exchange rate isn’t the only reason for rising pay. Some U.S. firms had already decided to raise salaries in their U.S. and London offices before the Brexit vote, with some U.K. firms following suit, Brian Sheehy, associate director of the legal recruiter Taylor Root, said by phone.
“I think what’s happened in the last two years is that Magic Circle firms have really taken a big jump in what they pay mainly more junior associates,” he said. “It’s probably a response to U.S. firms increasing their salaries.”
The U.S. firm Cravath, Swaine & Moore LLP raised pay for newly-qualified lawyers in New York and London to $180,000 in early June 2016, according to Legal Week. Executives at Cravath didn’t return calls and emails seeking comment on its salaries.
“When they announce they’re going to do anything on the remuneration front it tends to be the case that most of the big New York firms follow suit, and that is reflected in changes in the U.K.,” Sheehy said.
Clifford Chance LLP increased pay for new lawyers to 87,300 pounds including a bonus, up from 85,000 pounds last year, and Freshfields Bruckhaus Deringer LLP raised the base rate for new attorneys to 85,000 pounds in May 2016. The previous year it was 67,500 pounds with a discretionary bonus. Clifford Chance and Freshfield declined to comment on their pay.
“From the middle to the end of last year, U.S. firms tended to increase the salaries of their lawyers in the U.K.,” Tony Williams at legal consultancy Jomati said by phone. This was in part because the practices were matching the raises given in America, he said.
“The fact that the U.S. firms have tended to increase has meant other firms have had to respond to some extent,” Williams said.