Starting salaries in City almost three times higher than regions

By Ian Fraser

The Herald

July 2nd, 2007

Scotland is risking a brain drain among commercial solicitors, with newly-qualified solicitors now able to command starting salaries of in excess of £90,000 in the City of London but little more than £32,000-£33,000 in Scotland.

The shocking disparities in legal pay were brought into sharp relief following the release of figures from DLA Piper, which from September will pay newly qualified solicitors working in London nearly double what it pays them in Scotland.

“A lot more Scottish candidates are going down south,” says Liz Frost, a legal recruitment specialist at Hudson. “Money clearly has something to do with this. But also a lot of London firms including Linklaters and Herbert Smith have been doing recruitment roadshows in Scotland. They’re generally looking for qualified solicitors with experience of sectors such as banking and projects.”

DLA, which gained its Scottish presence through a merger with Bird Semple in 2000, has revealed newly-qualified solicitors in London will be starting on salaries of £63,000 from September, a 19% hike on last year. That followed a decision by rival law firm Addleshaw Goddard to boost pay for City-based newly-qualifieds by 20%, to £64,000.

However, lawyers employed by DLA’s offices in Edinburgh and Glasgow are, according to The Lawyer, to receive a meagre 3% pay rise with their pay rising from £32,000 to £33,000. In DLA’s Birmingham, Leeds, Liverpool, Manchester and Sheffield offices, newly-qualifieds’ pay rose by 4% to £36,500.

Bruce Westbrook, office managing of DLA Piper’s Glasgow and Edinburgh offices, said the £33,000 figure has yet to be finalised and then be reviewed in January. However Westbrook said: “There’s a war for talent going on in London, and it’s getting tougher. Salaries always reflect supply and demand.

“You have to pay more for everything in London. A 2000 sq ft house in a decent part of London will cost you about £3m. The same-sized property in Edinburgh’s New Town will cost £750,000. It’s just a London factor.

“Salaries for lawyers are also very different in Albuquerque to what they are in New York.”

Westbrook said that any leading commercial law firm with offices in both Scotland and London will invariably adjust their charge-out rates, and salaries, to suit each market. He said: “Whereas firms such as Dundas & Wilson will have a partner charge-out rate of about £275 per hour in Scotland, their charge-out rates will be more like £400-£500 per hour in London. You have to match your cost base and your business model to the location in which you’re operating.”

Significant Scottish-based firms with offices in both Scotland and London – which include Maclay Murray & Spens, Dundas & Wilson, McGrigors and Shepherd + Wedderburn – were not prepared to reveal to The Herald what they are paying newly- qualified solicitors in the two locations. However, most are expected to pay in the region of £33,000 to Scottish-based newly-qualifieds from September, but will need to offer in excess of £60,000 to secure the talent they need in London.

Neither MMS or Shepherd + Wedderburn would comment. However, Alan Campbell, managing partner of D&W, said: “We have not yet decided on our own figures which come into play in September, so it’s not really appropriate for us to speculate. At D&W we do and will take market information into account, but of course we do what we think is best for our business and that is not necessarily by following the herd.”

Kirk Murdoch, senior partner at McGrigors, said: “Our policy is to be competitive in all the markets we work in. In London we benchmark ourselves against good-quality City practices. We do not seek to compete with the US or magic circle law firms as we do not ask our people to work to magic circle or US hours and targets.

“To achieve that market competitiveness we do apply pay differentials in the various markets we work in and we believe that is the norm for national practices. We are just about to begin our salary review process so the new market information is very helpful to us.”

Pay differentials between London and the regions has generated some fierce debate within the legal profession, with many solicitors based outside London complaining that they are being treated as second-class citizens.

One contributor to a Legal Week forum on pay said: “Being shafted by one’s peers is unacceptable I think the guys in the regions at DLA have got reason to feel very, very annoyed.” Another said: “There’s a real danger of firms like DLA becoming very unattractive for employees in the regions – City hours, local salary.”

Contributors to the forum praised the Manchester- based firm Addleshaws for “breaking the cosy Manchester consensus” by offering starting salaries of £40,000 to newly-qualified solicitors. Addleshaws was described as a much more generous employer than either Pinsent Masons or Eversheds, because higher pay was also backed up by a more generous bonus scheme.

The huge pay rises received by City-based newly-qualified solicitors were sparked off by US “Manhattan elite” law firms, many of which pay their London-based staff equivalent salaries to the rates received by attorneys in New York.

Several of these firms startled the legal profession earlier this year when they announced they would be paying more than £90,000 a year to newly-qualified solicitors from September 2007.

The US giant Latham & Watkins is paying out £96,000 to newly-qualified lawyers in London, while Cleary Gottlieb Steen & Hamilton is paying £92,000. Another US firm, Weil Gotshal & Manges, increased its pay for London-based newly-qualifieds by 20% from £75,000 to £90,000. The firm also boosted salaries for three-year-qualified lawyers from £98,000 to £114,660.

Jonathan Wood, corporate partner at Weil Gotshal, justified the increases by saying: “We want to make sure we are looking after our people, who are doing some pretty exciting deals, and make sure they are appropriately rewarded as well as relying just on our deal flow to attract new people.

“We wanted to put clear blue water between ourselves and our competitors and pitch this at a level which reflects the quality of people we have and those we would like to join us. However, we felt that anything above £90,000 would be too toppy for a newly-qualified lawyer.”

However US law firms, despite their generous levels of pay, are not seen as particularly attractive places to work. A recent YouGov survey found only 7% of UK legal associates consider US law firms the most attractive employers.

Original article from The Herald website

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