Volatile Pound Hits UK Law Firms' Growth Ambitions​

By Jake Rickman​

What do you need to know this week?

The FT reports that the hiring efforts among the largest UK law firms including Magic Circle firms Freshfields have been affected by the volatile movements in pound sterling. Specifically, the devalued pound is widening the already-expansive gulf between the pay scales of the US firms operating in the UK and UK-based law firms.

Well before the current currency woes facing the UK, British firms have struggled to keep up with the deeper pockets of their American counterparts. Additionally, many US firms operating in London peg associate and non-equity partner pay to the US dollar. For instance, if a first-year associate hire in New York is paid $200,000, this is the figure that dictates how much a newly qualified associate (NQ) in London is paid.

Where this is the case, as the pound’s value relative to the dollar has fallen, the actual take-home pay a London fee-earner brings in has increased. A year ago, when $1 was valued at £0.74, a salary pegged to $200,000 was worth £148,000. Today, it is nearly worth £181,000.

To take a real-world example, NQ salaries at Akin Gump have risen from £159,000 in Q1 2022 to £179,000 in Q3 2022. Following the recent devaluation of the pound, Roll on Friday reported that Akin Gump decided to stop matching the actual USD-GBP exchange, instead using a band that locks in the lower and upper rates.

Why is this important for your interviews?

The truth is that bringing up the pay war in an interview may not always be the best call, especially at a UK firm, as your interviewers will already be acutely aware of the hiring challenges facing UK firms. Moreover, there is less variance in trainee salaries than at the post-qualification stages, making these developments less directly relevant to you.

However, provided you tick off all the other boxes when applying and interviewing at certain US firms, there is something to be said for targeting a firm known for higher salaries, especially if you intend to work in corporate or banking teams. This is because the hours fee-earners put in at the top firms are roughly the same, as the quality of work is broadly similar — that is to say, the best.

While money is certainly not everything, there is a reason many newly-qualified solicitors train at top Magic Circle firms and then move to a US firm: why work as hard for less money? In this case, appreciating how currency movements are affecting the hiring market can provide you with further insight into the dynamics in legal recruiting which you can use to direct your professional decisions.

How is this topic relevant to law firms?

As we might expect, none of the Magic Circle firms have commented directly on the situation. However, the FT article reports that the declining pound has led to at least one “major hire” in New York falling apart — plans which presumably involved a UK firms’ attempt to poach a partner from a US firm.