Survey Says UK Clients Deserting Magic Circle Firms

The Sharp Legal survey, conducted by business research agency Acritas, estimates spending trends on legal services from major corporations.

The survey predicts that City law firms are heading for a 17 per cent slump in demand for their services with regional firms expecting a 16 per cent increase.

Lisa Hart, chief executive of Acritas, said: "Companies are increasingly choosing regional firms over City firms for certain kinds of lower value legal work."

"This is mainly because of cost savings but also due to concerns that City firms may outsource lower value work, leading to a lower quality of end service.”

Although some firms will weather the downturn better than others, the study of three hundred companies including Shell, Barclays and Reuters, warns of a difficult year for the legal industry as a whole.

Total spending on legal services – which fell 6 per cent in February, 12 per cent in March and 17 per cent in April – is forecast to fall by 12 per cent over the next twelve months.

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The hedging effect of their extensive international networks will help "magic circle" law firms through the downturn leaving City firms without a global presence the most exposed.

China-related work will be the largest driver in the coming year followed by Russia and India, Sharp Legal said.

Mr Young said: "The demand for intellectual property services is proving to be the most reliable source of business in South East Asia. China is our biggest market but Vietnam, Singapore and Hong Kong are also booming. Russia is also a good source of work for corporate, financial and dispute resolution work."