By Louis Goss
Where to find the best paid job?
As strikes over pay have brought the country to a halt, it is notable that workers in one sector in particular have seen their pay packets bulge in 2022.
Aside from criminal barristers, who carried out a month’s long strike this summer, those working in private sector legal and professional services firms have seen their salaries surge in 2022, amid a battle for talent between the City’s top firms.
London consultants, lawyers, and accountants have experienced dramatic increases in their pay and benefits, as labour shortages and a boom in demand for legal and professional services saw demand outstrip supply.
The situation has come to the point at which newly-qualified lawyers in London’s top law firms are now paid more than the prime minister – with those at the top end of the scale handed sums of more than £160,000 per annum plus perks.
This wage inflation in the UK professional services sector has been made worse by the increased dominance of higher-paying US firms in the London market, and the weakness of the British pound compared to the American dollar.
All of that contrasts with average wages which are falling behind the rate of price hikes.
Economic headwinds?
Strikingly, the pay battle, that started during the boom in demand for legal and professional services caused by Covid-19, has continued into the latter half of 2022 – even as significant economic headwinds set in.
Law firms in particular are taking a ‘wait and see’ approach to the current downturn, due to fears of repeating mistakes made in the financial crash of 2008, during which law firms struggled to rehire laid off staff.
This ‘wait and see’ approach has seen the City’s top law firms continue hiring staff and continue hiking salaries, in their efforts to bolster their ranks with top tier talent.
Competition for talent in the professional services sector has seen a similar situation play out between the Big Four accounting firms – EY, PwC, KPMG, and Deloitte – who have invested millions into upping salaries in their efforts to recruit and retain staff.
The Big Four pay battle saw PwC in June invest £120m into giving a nine per cent pay rise to 11,000 of its 22,000 British staff, after KPMG in May invested £51.7m into giving £2,000 to £4,000 flat rate pay rises to 15,800 of its rank-and-file staff.
In July, PwC also said it would hike the salaries paid to NQ lawyers working in its legal business from £72,000 to £90,000 a year, in line with plans to double the size of its legal workforce over the next three to four years.
Partner pay
The wage inflation in the ranks of the City’s top firms, that is being driven by fierce competition to recruit and retain staff, has however been matched this year by an explosion in partner pay.
Those in the upper ranks of the Big Four in particular this year received record payouts – with partners at Deloitte taking away sums of £1.06m each.
Partners in top City law firms took away even bigger payouts for this years’ work. At the top end of the scale, partners at top US firms took away payouts of up to £6m in 2022.
However, lawyers in top British law firms also took home huge payouts this year, with those in ‘Silver Circle’ firm Macfarlanes seeing their overall pay packets bulge to £2.484m and partners at Stewarts receiving payments of £2.7m each.
Top lawyers in the Magic Circle law firm also received huge multi-million-pound payouts this year, as partners at Freshfields took away £2.07m and partners at Clifford Chance received £2.04m each.
The boom in partner pay comes as the City’s top firms have seen their revenues surge over the past few years – in large part due to the widespread disruption being experienced by those in the rest of the economy.
This disruption has seen companies turn to lawyers, consultants, and accountants for advice, in their efforts to navigate the volatility currently shaking the global economy at its core. Although potentially ruinous for many businesses, it is on the back of this volatility that the professional service sector thrives.
As such, in era of soaring inflation, stagnant wages and general economic strife, it remains unlikely that we will see City solicitors or Big Four consultants on the picket lines any time soon.
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