24 September 2012
Partner promotions at law firms fall as partners consider future profitability
- Firms reluctant to promote ‘unproven’ associates
Weak financial performance and uncertainty over the impact of the introduction of “Tesco Law” has caused the number of law firm partner roles to fall for the first time since the peak of the recession, says Top 20 accountancy firm Wilkins Kennedy LLP.
The number of partners at law firms in the UK fell by 153* in 2011-12 (year end June 30), the first time the number has fallen since 2008-9. In comparison, over 2,100* new partner roles were created in the previous two years.
Wilkins Kennedy says that the fall is likely to be driven by a slump in the number of solicitors and associates being promoted to partner.
A recent rise in law firm mergers has also led to a dip in partner numbers as practice areas consolidate.
Tommy White, Partner at Wilkins Kennedy, says: “Slow growth in fees means fewer promotions are taking place. At the same time some partners at smaller law firms have been forced to delay their retirement because of the recession.”
“Some partners approaching retirement age have looked at their savings and decided that a comfortable retirement simply isn’t possible yet – especially with such low annuity rates.”
“They might also own commercial property and private equity investments - whose value will have been hit by the financial crisis.”
“When existing partners delay retirement, it means that senior associates are forced to wait longer for their opportunity to join the partnership.”
Wilkins Kennedy says that in the current economic climate, law firms are likely to be reluctant to give partnerships to associates who have not yet proven their ability to bring in new business.
Explains Tommy White: “Given the state of the economy and its impact on the profitability of some law firms, it’s understandable that firms are reluctant to promote lawyers who don’t already have a track record of bringing in income.”
“Of course, it is more challenging for non-partners to bring in new fees during the recession, meaning that ‘proving yourself’ is tougher than ever before.”
“If the associates don’t look like they will be able to add to the profit pool, the partners are essentially being asked to dilute their own income. That’s less likely to appeal to many of them, unless the candidate is outstanding in some other way.”
Wilkins Kennedy says that some law firms have taken a different approach to the lack of new partnerships, creating new job titles and management positions for senior associates who have not yet been able to secure partnerships.
Says Tommy White: “We’ve seen a number of new positions created by law firms in recent years. Many of those with job titles such as Legal Director would have already been promoted to partner in a better economic climate.”
Wilkins Kennedy also says that some non-partners may choose to look elsewhere if the firm’s promotion policy and weak financial performance stalls their climb up the career ladder.
Tommy White comments: “This reduction in new partnership opportunities is one factor in the number of associates considering moving in-house. Younger lawyers who were hoping for promotion at their current firms may decide that leaving private practice may be the best way to avoid the bottleneck, and keep their careers progressing.”
Net new partnership positions created at UK law firms
*Data nets off new partner roles against partner roles lost over the year – based on data provided by the Solicitors Regulation Authority.
Wilkins Kennedy LLP
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Nick Mattison or Richard Crossan
Mattison Public Relations
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