Pay rises at top City law firms suggest that this time around the surge in training contract numbers is here to stay.
Training contracts have risen above the 5,000 mark again. According to the Law Society's newly-released 'Annual Statistics Report' for 2013, 5,302 training contracts were registered in the period 1 August 2012 to 31 July 2013, up from 4,869 the previous year. The increase of almost 500 comes amid a host of positive signals emanating from the UK legal market as confidence in a sustained recovery rises.
After the Lehman Brothers collapsed in 2008, training contract numbers initially held up pretty well in response to the economic downturn, dropping by a significant but not huge 8% to 5,809 places in 2009. But by 2010 things had got worse as law firms were forced to bite the bullet and take action to mitigate the dramatic falls in workflow that they had enjoyed prior to the crisis. Accordingly, training contract numbers fell to 4,874 amid widespread deferrals of graduate places never previously seen before, as firms paid future trainees to take gap years and join them the following year.
Although the legal profession was hit far less severely than other sectors, such as the banking industry, the decline in training contracts represented a jolt for solicitors and a sustained dip followed.
Thankfully, the rise recorded in this year's Law Society annual report appears to have been built on more solid foundations than the false dawn of 2011. This time around, the glut of deferred trainees who were a widespread feature of the market three years ago have been successfully absorbed by firms - and there are a number of signs on the horizon of rising demand for junior legal talent.
The most obvious of these is the associate pay rises that several of the Magic Circle firms have enacted over the last few months. Most recently, Linklaters upped its junior lawyer rates across the board, with three year PQE solicitors receiving the biggest remuneration rise by 5% from £89,000 to £93,500. The move follows Slaughter and May's decision last month to increase trainee and associate pay. Second year trainees at the firm will have their salaries raised from £44,000 to £45,000, while newly qualified rates are going up from up from £63,000 to £65,000.
Another notable development is the return to health of law firms which had to be rehabilitated after falling into difficulties during the financial crisis. Not all of these firms bear their original names, with many mergers taking place when their troubles escalated. The name of once-renowned national firm Cobbetts, for example, no longer exists, with the firm having been taken over by DWF in 2010. But after a period of consolidation as both businesses have been integrated, the Cobbetts legacy is being felt, with training contracts at DWF rising from 30 in 2010 to 97 this year thanks to the tie up.
‘The intake starting in September is actually slightly higher than that,’ explains DWF head of graduate recruitment Kate Hasluck. ‘We will review again in the summer, with numbers slightly flexible to accommodate exceptional candidates.’
Finally, some of the new legal businesses and alternative business structures (ABS) which have entered the market in the wake of the Legal Services Act (LSA) have grown to the point where they are ready to hire graduates. For example, one of the highest profile of the new legal market entrants, Riverview Law, is to launch its first ever training contracts later this year. The firm, which has offices in London and on the Wirral in Merseyside, will take on 10-20 graduates. In an indication of how keen Riverview is to boost numbers to handle increasing amounts of work, start dates are immediate – with the firm opting to break the traditional law firm approach of recruiting two years in advance. Riverview Chief Executive Karl Chapman says he expects to hire growing numbers of trainees in the years ahead. ‘We are growing rapidly and I will be surprised if we do not hire the same again or more new recruits in future years,’ he says.
Amid positive signs, there of course remains a degree of uncertainty and with the government's reforms to legal aid still affecting law firms specialising in publicly-funded work, no one knows exactly how the graduate law job market will perform over the next few years. But the strong indications that training contract numbers are recovering at corporate firms – which have historically provided the bulk of entry level positions in law – is highly encouraging. As the economy has recovered from previous recessions there has been a shortage of law graduates. Don't bet against the same happening this time around.