ÀÏ˾»úÎçÒ¹¸£Àû

The City's legal legacy is one of the oldest in the world, with origins tracing back to the Elizabethan era. This notoriously cut-throat and hyper-competitive market has been difficult to crack. Over the years, we've seen predictions of many new players poised to take over the market, but despite small shifts, City firms have still dominated. 

However, this time seems different and these new predictions seem credible. Our recent report, The three key competitive threats facing City law firms, showed how one core threat stems from the growing presence of US law firms. Market penetration, in the last few years, has reached surprising new heights. found huge growth figures for US firms in the UK, with 23 experiencing double-digit revenue growth, and seven experiencing a 20%+ turnover. 

In this article, we examine the long-term potential of US firms in terms of market growth and show how they might pose a threat. We also explore the key differences between UK and global firms identified in our report, The pros and cons of the global law firm.

Tracking the growth of US firms 

The UK's top law firms, including those comprising the Magic Circle, have long faced competition from the US. We've seen a presence of ambitious firms from as early as the 1970s, with the primary aim of serving US banks and multinationals doing business in Europe. Initially, they faced stringent legal restrictions and acted solely as consultants due to their inability to practice English law.

Liberalisation of regulation allowed for more concrete market penetration through the 1980s and 90s. US firms could now employ people from the UK, allowing them to directly compete. A boom in mergers and acquisitions (M&As) saw further expansion of US firms, with increased competition.

More M&As followed in the next two decades, along with US firms seeking to . They diversified their offering to meet the increasing complexities of global business, venturing into new areas and started to entice top talent from UK firms using exceptionally high remuneration packages.

But US entrants were matched with dissolutions. Since 2000, several US firms dissolved or retreated, including Howrey Simon, Troutman Sanders, and Riker Danzig. The market has fluctuated with key challenges often becoming opportunities. For example, some US firms used the 2008 financial crisis to gain ground, and some used Brexit to find new clients needing regulatory advice. 

So London has long been, and will continue to be, the leading European City for US firms. The : client proximity providing a gateway to Europe, recruitment of skilled personnel, promising position for a global client base, London's role as a financial centre, and so on. And at present, as evidenced in our report, US firms are witnessing huge market growth.

Lexis+ saves time and energy, helping you dedicate more time to work that matters most to clients. Find out why it's a must-have in any lawyer's toolkit.

The difference between global and UK firms 

Global firms and UK firms greatly differ from UK firms, with the most obvious being found in the name. Global firms are global. This means they often appeal to multinational organisations or clients requiring high-stakes cross-jurisdictional work. Conversely, UK firms offer a more concentrated knowledge of UK law. 

Global firms tend to possess greater specialities. They offer better project management and process management capabilities and recruit a wider range of specialists. The scale of the global firm provides general advantages, such as streamlined processes, less resource waste, and improved operations, all of which can ensure a better return on investment for clients. 

The time to invest in legal tech

However, UK firms may have a higher appetite for legal tech. The UK's increasing interest in legal technology is often attributed to the introduction of the , which enabled non-lawyers to own and operate legal services firms. The consequent introduction of alternative business structures (ABSs) prompted fiercer competition, incentivising traditional firms to invest in tech and innovation.

Global firms, particularly US firms, haven't followed the same trajectory. US firms, as shown in our report, haven't seen the same level of enthusiasm towards legal tech because ABSs are banned in many US states. Global firms lag behind, simply because they haven't needed to catch-up. 

But global firms are legal powerhouses. Recent research by has shown that US firms account for 53% of the global legal spend whereas UK firms account for just 7%. And market dominance means that global firms can offer far higher remuneration. Consider, for example, that Clifford Chance recently hiked annual pay for junior lawyers in the UK to £125k, matching Magic Circle peer, Freshfields Bruckhaus Derringer. But US firms, such as Davis Polk & Wardell, pay junior lawyers as much as £160k.

Robert Shooter, , says: "US firms are sophisticated outfits and offer rewarding careers for their people...US firms, in particular, largely run their offices from the US and have US expectations of their people."

So, is is time to leave the billable hour behind?

Billable hour expectations at global firms are much higher that UK firms. The average at the top 10 UK firms sits at 1,373 per year, , but at US firms, targets often sit between 1,700 and 2,300 hours per year.

The difference in expectations can be seen in working hours. measured the average start and finish times for lawyers and found junior lawyers at UK firms work just over 10 hours a day. That number jumps to roughly for those working at global firms.

UK firms arguable provide better legal tech, local knowledge, and a greater work-life balance. But, global firms have more specialist expertise, wider reach, and can certainly offer more money. Both possess a certain appeal to lawyers, depending on their career, practice area, and future ambitions.

Read the full report, The three key competitive threats facing City law firms, today.