Marketplace Update: May 20205

A firm’s financial health has long been the key factor for attracting talent, yet their political stance has now also been brought into sharp focus with the new Trump administration. Executive Orders being made against law firms, threatened against others and a range of firms making deals before EOs were made has divided the US firms with their responses.

With many firms either doing deals with the Administration (nine and counting), staying silent (whilst quietly deleting DEI information from their websites) or signing the amicus brief in support of firms fighting the legality of the EOs, the contrast in firms’ reactions to the targeting of law firms is stark. To capitulate or take a stand? And will this added dimension impact on a decision to move firms?

Current indications are that a handful of associates have taken a stand by resigning from firms who have done a deal. But the impact on law firm clients may lead to more movement. With Microsoft moving a case from Simpson Thacher to Jenner & Block, it’s clear that there are unintended consequences in any response. If clients choose to move their work because they disagree with that firm’s reaction to the threat of EOs, it is no longer just a lawyer’s personal views or appetite for change that may sway their loyalty towards their firm.

With the US headquartered firms grappling with either being on or staying under the US Administration’s radar, this hasn’t stopped the continued swell of movement in the City or the ever-dizzying rise of revenues and profitability at the leading US firms. Sidley is on the march, Proskauer is building and firms continue to benefit from the exodus from A&O Shearman.

Whilst geopolitical changes are a boon for lawyers in the short term, they may mask longer-term market weaknesses. The legal press has reported that work realization rates are up, but productivity is down.

For UK firms, whilst the pay gap continues to grow against their US competitors, an eye on the longer term is interesting. There are different footprint strategies afoot– either internationalisation (the Middle East is proving attractive to many) or dominating domestically.

The next few months is likely to see the release of fairly positive financial results with profitability continuing to trend upwards. Helping with profitability is the reshaping of business support services and we are seeing a number of firms who are quietly reducing their support roles.