Those thoroughly fashionable provinces – vogue for City players to hit low-cost regions becomes the new black

Sarah Downey reports on how a regional arm became the hottest accessory for London firms

How the fashions in professional services can change. Having long disdained moving into lower-cost regions, March saw another two top 20 City players announce ‘northshoring’ ventures, with Hogan Lovells and Berwin Leighton Paisner (BLP) confirming moves respectively into Birmingham and Manchester.

Hogan Lovells expects its Birmingham legal services centre to launch in the autumn, with City-based co-head of private equity Alan Greenough to manage the project, taking the former Pinsent Curtis veteran back to his Midlands roots.

‘I’ve committed to set it up for most of this year and next,’ comments Greenough. ‘Then I’ll decide what I want to do and so will Hogan Lovells. Client feedback has been positive – this is all client driven. They’re looking for us to provide cost efficiency. This is part of an ongoing issue for law firms. For us, it will be an extension of the London office.’

The Midlands centre, news of which comes after Hogan Lovells in February announced the launch of a business process support hub in South Africa, will undertake standardised legal work as a support operation for the firm’s London office. Greenough says the key objective now is finding the right premises and to bring in quality staff.

BLP, meanwhile, confirmed in mid-March the launch of a services package for clients, including rolling out a lower-cost team in a new Manchester office this summer. BLP managing partner Neville Eisenberg comments: ‘We looked at a number of options onshore and offshore. Manchester has a large pool of lawyers and a very good reputation as a service centre for different industries.’

In addition, Field Fisher Waterhouse announced earlier this year that it was to establish a lower-cost arm in Manchester via a merger with Heatons.

‘Client feedback has been positive – this is all client driven. They’re looking for us to provide cost efficiency.’
Alan Greenough, Hogan Lovells

The moves underline the extent to which advisers aiming to position themselves as heeding client demands for value have come to focus on regional moves since Allen & Overy and Herbert Smith Freehills in 2011 set up support operations in Belfast.

The two City firms have since substantially expanded their Northern Irish operations. Such moves – often backed by regional investment grants – have rapidly become the preferred option rather than offshoring in lower-cost countries like India or large-scale outsourcing – the two options that were most touted three years ago.

Last year was also particularly notable for the launch of a similar venture by Ashurst, which created a 150-strong unit in Glasgow covering back-office support and volume legal work. Some Ashurst partners have privately indicated that the operation could grow substantially beyond its current numbers.

Officially opened in September, Ashurst managing partner James Collis says the venture has been a clear success: ‘Six months later it’s the fourth-largest office in the global network, which gives a view to how quickly it’s grown.’

He adds: ‘What it represents is a way of effectively delivering legal and non-legal services other than the way traditionally done. We are seeing the legal side is not just serving London but other parts of the network as well. We’ve been pleasantly surprised that the internal market within the firm has taken up the opportunity to use Glasgow.’

Asked about plans to extend the approach, Collis comments: ‘At this stage, we’re very focused on making sure Glasgow is developed to its full potential. We’re pleased with how it’s going. But we want to see it grow more over the coming years. Glasgow’s scope of its operation extends well beyond the shores of the UK – and that is something we encourage.’

Herbert Smith Freehills is also bullish on its Belfast move, confirming a pilot to roll out the use of the hub to its Australian merger partner in January. The office is used to support work coming from Europe and Hong Kong, and has already surpassed initial growth targets with 120 permanent employees, almost evenly split between qualified lawyers and legal assistants.

Belfast director Libby Jackson says the pilot aims to ensure teams, processes and technology work together to deliver efficiency and legal work to the Australian disputes practice across time zones.

With Simmons & Simmons in 2012 setting up an operation in Bristol and CMS Cameron McKenna to gain substantial UK exposure with its impending merger with Dundas & Wilson, it is clear that moving into the once-patronised regions has become the dominant response for City firms in the post-Lehman environment and a de rigueur accessory for advisers looking to gain favour with bluechip GCs.

As one partner at Hogan Lovells comments: ‘Clients want to see that firms have these kinds of facilities. They want to be comfortable that you take these things seriously. In the long run, it will help with profitability – you can’t just have lawyers in London doing every single thing on transactions, or every piece of legal work.’

Eisenberg picks up the theme: ‘The message from clients is clear.’