Remember convergence? In the 1990s’ tech boom the concept was all the rage. It was the simple idea that rapidly-advancing communications would see once-discrete platforms and information systems like TV, the printed word and telephones merge and dynamically share data in an economically seismic fashion.
What happened next says a lot about human nature, business and the whimsy of prediction. The internet bubble burst and such utopian visions were suddenly crazy. One received wisdom replaced another. Except convergence was one of the most accurate forecasts ever made about industry – it just took technology another three years to catch up with the hype. The fundamentals prevailed.
The point? Foreign firms in London are the legal profession’s equivalent of convergence. Initially over-sold when US-based advisers started to move into UK law in the 1990s, they found the market more challenging than expected. They had the resources but the combination of domestically-focused head-offices, aversion to profit dilution and some delusions about the international reach of their brands made many struggle. Throw in initial rounds of misconceived recruitment and their ambitions were set well back as City rivals, spurred into action by their advance, raised their collective game.
By the height of the last boom US firms looked in danger of being squeezed out of the City. And credit to London’s finest for that achievement. Yes, they had some luck with the soaring status of the City and a strong pound but shrewd governance and institutionalisation of their practices allowed them to out-play the simpler (sometimes simplistic) strategies
US invaders were deploying. This meant the good partners stayed and even when they didn’t, the clients largely did.
But such tactics have reached their limit in the face of economic reality. Reviewing this month’s Global London special it is plain that the forces driving American firms in the City are as fundamental as the march of technology that made convergence happen. US firms have the scale and profitability but now they also have far more significant beachheads in Europe and vital local knowledge.
As important, recent years have shown that firms can not only pull in good partners and quality work but some can generate real profitability in London – that sends a powerful signal to the US partners sanctioning investment.
Since the markets turned in 2008, the momentum has been with US firms. London’s elite has had a solid run but nothing more. Not enough to upset the fundamental realities they face in competing with challengers fuelled by a far larger economy with far better growth prospects for the next five years than the UK. The old defensive play worked once, it won’t so well in the future. It’s time for some new tactics.