City lawyers’ pay: the squeezed middle

It pays to be a newly qualified lawyer in London. Just not that much more if you stick around.

Solicitors fresh from their two-year training contract are the main beneficiaries of a salary war fought on both sides of the Atlantic. Five US-based firms now pay their London lawyers more than £160,000, almost triple the rate offered to the best-paid trainees. Forty City offices have starting salaries for newly qualified lawyers in the six figures, according to rankings compiled by website Legal Cheek.

After that, rewards start to flag. Mid-level solicitors complain that while youngsters’ salaries spiral upwards, theirs stagnate.

In the US, competition dictates that big law firms are measured against the salary scale of top dog Cravath. Pay rates are less opaque. They are published for lawyers up to eight years out of law school. Wages top out at roughly twice the starting level. Associate wage bills rose roughly 11 per cent in the year to November, according to Thomson Reuters.

The UK has resisted such transparency, in part because lower profitability means firms cannot keep up. Trainee-light US firms often lure those in the mid ranks. For a while, that suited UK firms’ “up or out” model just fine. But too many lawyers now prefer to opt for “out”.

Firms have tweaked benefits and bonuses for those most in demand, with extra payouts for private equity specialists at Freshfields and leveraged finance associates at Allen & Overy. Yet UK partnerships have refused to adopt US-level pay for older lawyers. Inflation is likely to add to existing pressure for raises.

But the end of last year’s deal frenzy will cool US firms’ incentives to mount an assault on their British rivals’ ranks. That will limit the scope for sizeable increases. Over time it will also eat away at the value of juniors’ gains, easing the salary compression. For now, however, London’s older associates remain caught in the crush.