[speaker001:] [music] British commercial law is amongst the most expensive in the world. With new firms in the North of England under cutting their city rivals, is the writing on the wall for one of London's most traditional professions. [music]
[speaker002:] Behind the city calm a battle is raging. A business worth three billion pounds a year is at stake. The attack is being spear headed from his new London offices by lawyer Paul.
[Paul:] There will be firms who are practising today who will probably figure in the er top one hundred in the city who in my opinion will not be practising in that shape or form three years from now.
[speaker001:] I think they've got their cost structures er a a little bit out of line and I have to be honest that I think that some of them have thought that er all you have to do is, you know, keep a brass plate outside your door for fifty years and the work would roll in.
[speaker002:] Paul is a managing partner of a controversial firm of Yorkshire lawyers,. Champagne has long been used by the city institutions to woo clients. It's now become the weapon of the invaders from the North to sell law.... Since moving in to the heart of the city last year,has become the talk of the legal world. Paul is a lawyer other lawyers love to hate, but his is only one of a number of Yorkshire law firms that are sending a chill down the back of the London legal establishment. They may scoff and call them Yob and co, but the revolution that these firms have brought to the legal market is probably here to stay. [music] The city law firms all clustered within the boundaries of the square mile have dominated the market in legal services. Like other city institutions they grew fat on the back of the eighties boom. Even when the recession hit there was money to be made from liquidations and restructurings. is Britain's largest law firm and occupies a plush new building in the city.
[speaker004:] We have er one thousand two hundred lawyers in our firm round the world er continuing to develop their skills, continuing to deal with clients on a daily basis to make sure they're able to service those those demands.
[speaker002:] , with two hundred and thirty partners, turned over two hundred million pounds last year. The profits averaged out at a quarter of a million pounds per partner. A recent survey showed the big London firms to be the most expensive in the world. They can charge over three hundred pounds an hour for a partner's services, but that's increasingly subject to negotiation.
[speaker004:] Clients are not naive, they understand the job that needs to be done. They understand the price that is the market price to be paid for that. It's at the end of the day what you do for them. How you do it and whether you provide real value for money that is the important thing. [music]
[speaker002:] This week's London motor show. General motors is promoting it's latest models in face of falling demand in European markets. The recession has made it take a hard look at the cost of law and at the attitude of big London firms that it's used for more than fifty years. Keith heads its U K legal department.
[Keith:] They maybe haven't listened to their clients enough, particularly their industrial and commercial clients over the years. I think there was a there tended to be a feeling that value for money was not a a a requirement along with quality.
[speaker002:] Why?
[Keith:] I think it relates perhaps to the fact that er the city institutions and the city law firms er concentrated on quality and competitiveness, value for money, cost saving wasn't necessary a part of the issue.
[speaker002:] And for many of Britain's best known companies the cost of law has become an issue in a way it never was before.
[speaker001:] Many years ago you didn't query the fees erm and er that's no longer the case.
[speaker002:] Why don't you query the fees?
[speaker001:] Well in in th the year that I was brought up in there was a a much more er er traditional fee structure which simply wasn't negotiated in the same way as it is today.
[speaker002:] Until recently there wasn't anywhere else increasingly cost- conscious industrial firms could go. [music] That was before the rise of the Yorkshire lawyer. Costs in the north are much lower and local lawyers have bred a hard nosed approach to business. One of the country's fastest growing law firms is.
[speaker006:] Leeds has has grown as a financial centre over the last four or five years, probably more than any other city outside London. The law firms within it have been competing very strongly with each other, there are six extremely good law firms in Leeds and their I think that that experience in competition over the last few years will stand them in very good stead.
[speaker001:] Yeah it wasn't bad at all. You came came up by train? Yeah
[speaker002:] Today the firm's rehearsing a presentation to a major public company which is conducting a beauty parade. It's becoming the fashion among big clients to make lawyers pitch for their custom.
[speaker001:] We've er handled nearly ten percent of all U K floats in nineteen ninety three. Some of those have been very substantial, companies coming to the market with er market capitalizations in excess of a hundred million pounds.
[speaker002:] It's the beauty parade that's allowed regional firms access to what had been exclusively London business.
[speaker006:] Certainly if we're beauty parading against er maybe London firms where perhaps the attitude might be a little bit more than it is from the provincial firms that perhaps are used to having closer relationships with their clients.
[speaker002:] And before beauty parades, presumably a lot of these clients you wouldn't even get to meet would you?
[speaker006:] Erm no it'd be very difficult to get an opportunity to do so.
[speaker002:] It was through holding a beauty parade that I C I discovered the benefits of using a regional firm. The company decided to put all it's litigation work, worth over a million pounds a year, out to tender. It started with a list of city firms, but it soon realized there were other options.
[speaker007:] There were only three er criteria when we set out to choose a firm. Er expertise was the first and foremost requirement. Cost effectiveness was the second, and willingness to take some of our staff was the third.... er met all those criteria and they had one additional benefit, their Leeds' base er means that er their centre er their own centre of gravity is very near where I C I's centre of gravity is, up in the north of England.
[speaker002:] The northern lawyers haven't been slow to see the marketing potential of providing legal services close to home. This year has done six major floatations of northern companies. The biggest was valued at over one hundred and fifty million pounds.
[speaker006:] If you go back seven or eight years ago er the city institutions would be saying to the companies, you know this is a er a major matter in the in the growth of the company and you need you need city representation, you need a firm of city lawyers to deal with it. Erm nowadays that's not the case and erm all the institutions know that there are some damn good firms out in the provinces who can who can provide the service.
[speaker002:] But here in London's legal citadel, until recently, has been played down. The strength of the largest city firms stems from the international business that flows through the capital. is Britain's fifth largest legal business.
[speaker008:] It's certainly true that er the big regional firms now do a lot of corporate work. But we don't find, if you like at the top end of the corporate finance market, that they are yet as significant a competitor as are er rivals among the leading firms. But do do the city firms think that they will become tough competitors in that market? It depends really what happens to them I think. I think they've built They've opened London offices, many of them, if those offices grow so they acquire the sort of breadth and depth of experience in the relevant areas that the big firms have got and at the moment er they may not have, then of course they'll be more and more competitive.
[speaker002:] Because so much of the commercial law trade go through London,have opened up a second front in the capital. Determined to break up what it sees as a cosy cartel, it has already spent over a million pounds on marketing and corporate entertainment. Today's party is to celebrate the floatation of a Mercedes dealership, the client is more than happy with his choice of lawyer.
[speaker009:] I know that it was erm very much more cost effective er than we would have got er for similar services from a traditional firm in the city of London.
[speaker002:] What sort of saving do you think you've made?
[speaker009:] probably about a third overall, with all the various aspects of the transaction in terms of all the legal costs.
[speaker002:] And has another trick up it's sleeve. It's been actively recruiting partners out of London law firms, along with their clients. One firm to experience poaching is a second tier London firm,. It's lost two senior partners to Yorkshire firms in little over a year.
[speaker001:] They I think are strengthening or er strengthening their position in the market in London by erm er a very sensible strategy of looking for er able people with client following. No doubt its an attack but other firms are doing the same.
[speaker002:] They want to take your clients and see you off the map?
[speaker001:] Well I don't think its quite er the level of aggression is quite up to that, I'm sure that the market for legal services is now very much more competitive which is a healthy thing, and er if er if we were simply sitting on our hands from the nineteen eighties and not bothering to respond to that kind of challenge then I would be worried about it, but we're not.
[speaker002:] For all that there's no denying the distaste felt by many London lawyers for tactics. They've been seen as too aggressive and too greedy.
[Paul:] Aggressive? In what sense? Aggressive in terms that we fight in the market place for for clients and that we er then if that's what aggressive means the answer to that is yes. Er in terms of greedy, greedy in what? In that we manage to take good lawyers from other people? That's not greedy, that's just sound business sense.
[speaker002:] The city revolution is far from over. This week hopes to emerge with a large Birmingham law firm to strengthen its hand further. The game plan is to grow big enough to threaten even the city giants. With other regional firms joining in the battle for city work, even the biggest London firms have had to cut their fees and shake up their ideas. That in itself could be a lasting monument to the Yorkshire Terrier. [music]