Clifford Chance Ups the Ante in the City Pay War​

By Jake Rickman​

What do you need to know this week?

Magic Circle law firm Clifford Chance announced on Monday it will now pay its newly qualified solicitors £125,000 per annum.

This marks yet another raise in what seems to be a never-ending series of pay increases for commercial solicitors in London. Clifford Chance follows Freshfields Bruckhaus Deringer, which in April also raised its NQ salary to £125,000. Both law firms are now the highest-paying UK firms in the City.

However, the Magic Circle firms’ pay still does not reach the zenith of certain US firms: Akin Gump pays its NQs in US dollars — and lots of them at $200,000 (or £164,000). Similarly, according to The Lawyer, Gibson Dunn’s NQs are currently on £161,700. Several other US firms pay their NQs between £140,000 (Cleary Gottlieb and Dechert) and £159,000 (Vinson & Elkins).

Why is this important for your interviews?

Having a sense of this conflicted landscape is important for anyone looking to become a City solicitor — not least because it is vital to know what you’re getting into. But more generally, you will be expected to understand the economics behind your salary when speaking with interviewers.

Business is booming for commercial law firms — particularly those specialising in transactional work like M&A and private equity practices. This is (perhaps unsurprisingly) owed to the record number of corporate transactions, which reached record highs in 2021.

City law firms are desperate to recruit newly qualified lawyers because they are instrumental in putting in the hours required to close these deals. In addition to these eye-watering salaries, certain firms also pay one-off bonuses.

However, some question how long this race to the top can last. For one, with such high salaries comes the expectation that associates will put in 100 hours or more a week, workload depending. And indeed, part of the demand for NQ talent stems from the fact that rates of burnout and industry exodus are also at all-time highs. Many lawyers are increasingly questioning if the work is really worth the premium paid.

Secondly, there are doubts as to how long the market itself will be amenable to the stretch of dealmaking that has characterised the past couple of years. In light of a slowing economy, historic levels of inflation, and rising interest rates, will clients be as interested in deploying their capital towards corporate acquisitions in the future?

How is this topic relevant to law firms?

The economics of private legal practice dictates that fee-earners should be maximally leveraged. What this means is staffing the appropriate number of junior associates per deal relative to the more senior associates and partners.

From the perspective of a City firm, the competition to win business and close deals has never been higher. Paying to attract the top talent really is worth the investment for the top City law firms, given that high profile transactions like Elon Musk’s attempted acquisition of Twitter can net law firms tens of millions of pounds.