Letter from London: On the Brink of a Double Dip?
Welcome to Letter from London, a weekly look at the U.K. legal world by our London correspondent, Alex Aldridge. He asked various managing partners what European debt contagion would mean for large law firms in the U.K. And, predictably, they reeled off the standard recession line about law firms being “well placed to handle the anticipated wave of restructuring work.” The worry is what happens after the restructuring is complete...
Ed. note: Welcome to Letter from London, a weekly look at the U.K. legal world by our London correspondent, Alex Aldridge. Alex previously covered the London riots and the royal wedding for Above the Law.
“Thank God” Britain didn’t join the Euro, said U.K. chancellor George Osborne last month, as the debt crisis in Greece began to spread to the much larger economies of Italy and Spain. But with the fortunes of the U.K. tightly bound to the rest of Europe (its biggest trading partner), the reality is that we’ll be hit almost as hard as our single currency-sharing neighbours if, as many expect, the crisis worsens.
Last week, as I did the rounds of the U.S. law firms in London in preparation for the commencement of these regular installments from across the pond, I asked various managing partners what European debt contagion would mean for large law firms in the U.K. And, predictably, they reeled off the standard recession line about law firms being “well placed to handle the anticipated wave of restructuring work.”
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Doubtless there’s some truth to this. Indeed, Skadden and Linklaters are already riding the wave, with the pair currently advising on the merger between Greece’s second- and third-largest banks. Such are the demands of the deal that much of Skadden’s relatively small London office has apparently been required to temporarily decamp to Athens.
The worry is what happens after the restructuring is complete, with experts predicting that Eurozone sovereign debt defaults could precipitate a decade-long depression. This would be especially bad for the legal profession….
“Lawyers rely on activity,” Tony Williams, the former managing partner of Clifford Chance who now heads legal consultancy Jomati, told me recently. “What hurts them isn’t boom or bust, but market paralysis.”
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For the time being, though, London keeps bumping along, with the continuing wealth of some of its residents demonstrated by the current trend to dig four-story holes under houses and fill them with, according to the New York Times, “not just swimming pools, but also cinemas, recreation centers, gyms, wine cellars, bowling alleys, squash courts, climbing walls, servants’ quarters, saunas, waterfalls, Jacuzzis, hair salons and multicar garages with special elevators to shuttle vintage car collections up and down.” The spectre of the recession is only evident in the (allegedly) shoddy standards of workmanship: last year a dumpster fell through a London road weakened by a basement renovation.
What’s changed fundamentally since the boom days is the state of mind of young middle-class Brits. Pre-Lehman, there was a perception that, with hard work and bit of luck, you too could one day get your own bowling alley with a waterfall. But now growing numbers of generation Y-ers complain about a glass ceiling blocking their progress, as the X-ers and Baby Boomers seek to hang on to what they’ve got. The situation is particularly pronounced in Biglaw, where frustrated U.K.-based associates say progression to the megabucks of partnership has become “an impossible dream.” Unless, that is, you head to to Asia.
With several leading U.K. firms recently announcing ambitious Asia-Pacific growth plans, there is currently a lot of talk here about — in the language of legal magazine subeditors -– “riding dragons” and “eastern promise.” “If I was 30, with no family commitments, I’d definitely consider moving to Hong Kong. As a securities lawyer, that’s where the big opportunities are right now,” Reed Smith partner Scott Cameron told me the other day over coffee, summing up the mood, as he gazed like a modern-day Charles Marlow towards the Thames estuary from the firm’s office on the 32nd floor of a newly-erected London skyscraper.
With thoughts of a future bid to become ATL’s Asia correspondent racing through my mind, I bade Cameron farewell and made my way out of the building. At which point the street collapsed beneath my feet and I went plummeting into a Jacuzzi.
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Alex Aldridge is a London-based journalist specialising in legal affairs. He writes a weekly column for The Guardian and contributes regularly to specialist legal publications. Previously Alex was Associate Editor of Legal Week, having begun his career with The Times. Follow Alex on Twitter @AlexAldridgeUK or email him at [email protected].
