As law firms strive to deliver increased efficiencies and improve profitability, a growing number of large international players are seeking to move certain support functions elsewhere. Taking advantage of the cheaper commercial rents on offer outside London, Freshfields looks to be the first ‘magic circle’ law firm to establish a support operation in Manchester.
A few years ago it was all about off-shoring support work. Clifford Chance and Eversheds were among high profile names which pursued various options in India. The intention was to hive off certain low level areas of work such as research and analysis and exploit the cheaper commercial rents as well as a less costly work force in these emerging markets.
The near-shoring revolution
Whilst off-shoring in this way seems set to continue, the latest trend appears to be that of ‘near-shoring’. That is, the process of moving such low profit, repetitive support functions to select locations within the UK where the operational costs are significantly lower. Allen & Overy and Baker & McKenzie opened support hubs in Belfast in 2011 and 2014 respectively whilst Ashurst has chosen Glasgow and Hogan Lovells has opted for Birmingham.
The latest law firm to develop this strategy of near-shoring is ‘magic circle’ practice Freshfields Bruckhaus Deringer who have reportedly instructed Knight Frank to look for 100,000 square feet in Manchester. With commercial rents in the region coming in at around fifty percent cheaper than London prices, it is not difficult to see why this is an attractive option for the City heavyweight.
It is an exciting development for the Manchester legal services market which has already seen the likes of Berwin Leighton Paisner and Nabarro establish similar operations in the city centre with international US giant Latham & Watkins set to arrive very shortly.
But what does this all mean? Will the Manchester office of Freshfields simply be an isolated, outpost in the North or will the firm decide to develop certain client facing services from that location? Will they even offer training contracts at a later date?
Office to focus on lower level repetitive work
In the short term, it is clear that the motives behind establishing the Manchester office are that of a cost saving exercise rather than expansion into a new regional market. True, Freshfields may well look to recruit a team paralegals to assist the big ticket fee earners in London, but the idea that the firm will shift its City centric focus would be wild fancy.
That said, the office may evolve into a more rounded operation further down the line. Allen & Overy, for example, are offering five training contracts to paralegals in their Belfast office in 2015. Furthermore Nabarro’s Manchester office, which previously focused only on commercial property law, recently developed a corporate edge with the hire of Howard Gill from Pinsent Masons.
The Manchester office of Freshfields is likely to remain a support function for some time, but the arrival of such a respected international player will undoubtedly send ripples through the Manchester legal services market as well as the recruitment sector.
Shockwaves through the Manchester legal job market?
Freshfields will no doubt be looking to attract the best support staff in the market so expect attractive salary packages designed to lure away established regional top tier talent.
Moreover, it will be interesting to see whether, in years to come, the firm identifies a business case to develop a small solicitor-led fee earning capacity. The North West is home to a large number of FTSE companies, after all. Is it such a gigantic leap to suggest that the Manchester office could become a valuable platform in servicing these client needs?
In any event, the arrival of such a firm can only be interpreted as a positive thing for the Manchester legal job market and further highlights Manchester as the city-of-choice outside the capital.