Much like British voters ahead of this month’s vote on EU membership, City law firms have been shaped in recent decades by mainland Europe, even as they have become increasingly ambivalent about that mingled destiny.
It was the huge bet on European integration that gave birth to the global law firm as pioneered by London’s legal elite through the 1990s. At the turn of the millennium, the key strategic battles among City law firms were as likely to be fought in Frankfurt or Milan as London.
It is often forgotten now but as recently as the early 2000s UK lawyers frequently saw the City as just one financial centre among many vying for global prominence; as the euro launched, many believed that a mainland European centre would steadily take market share from the Square Mile.
It has not turned out to plan. The European legal market has segmented, with London the increasingly dominant regional hub, while City firms have found it increasingly difficult to operate profitably in mainland Europe. Being dominant players in Europe cemented the rise of the Magic Circle as global players yet now at least three of that band are still struggling to regroup in the post-banking crisis world because they are held back by sprawling European practices.
That, as we acknowledge this month with the launch of a new annual report focused on the top 100 independents operating through Europe, has left an increasingly clear chunk of a large market for such firms to target.
Within that group fortunes diverge enormously. Dublin law firms, benefiting from Ireland’s investment-friendly policies, are booming, with its commercial legal market getting to a comparable value to European jurisdictions with far larger economies. Surprisingly, Iberia’s firms – which have had to deal with some of the worst of Europe’s post-2008 fallout – have repositioned themselves with considerable success. Conversely, independents in the established economies of Germany, France, Italy and Benelux have had more mixed fortunes.
Retrenchment of leading US and UK firms from these markets on one hand gives the independents more of the market to dominate, but also contributes to the price sensitivity of plcs and major clients in those jurisdictions who have comprehensively rejected Wall Street/City rates for the vast majority of work.
The future of the elite European independent as a breed looks assured once again, but individually the major firms face challenging headwinds and delicate balancing acts to modernise their businesses for a more globalised and networked world.
But the bottom line is that national and regional firms are handling vast swathes of work in what is currently the world’s largest economic area – unless accountancy-tied law firms redouble their efforts. With even Dentons making much of its referral links, law firm networks once again booming and the IBA’s international conference growing by the year, the one-stop shop is largely shut in Europe. The legal industry – in the City and Europe – is still working out what comes next.
Subscribers can read more on European firms in: ‘The Euro Elite 2016’