Shocking news in the sedate world of the legal sector yesterday. Magic Circle firm A&O has decided to open a big office in Belfast that will do some work for clients as well as moving up to 180 jobs from London to Belfast (read that as London redundancies).
Now A&o call this'onshoring' rather than off-shoring. But for a beast like A&O that only has an office in London, and technically there is a sea between Northern Ireland and Britain; so I am not so sure.
What it does show is finally (although Herbert Smith opened a Northern Ireland office) the Legal sector is being affected by cost drivers that have long driven Finance, HR, IT and other support departments. This is perhaps not so good for those £1 million plus partners who work at these top firms and manage to avoid the brickbats of being bankers despite earning more than your average banker by some distance.
The reason is that their clients have caught on to the fact that law firms aim to have 30% margins and nice swanky offices in the major cities around the world, whilst their clients move their head offices to Newbury, Cheshunt, or even Dublin. Given the UK legal sector is something of an oligopoly at the high end, the Magic Circle firms reality has been avoided for some time.
Also, Magic Circle firms are worried about 'brand' issues. They have the best people so sell on quality. Employing Northern Irish staff on lower wages and getting them to offer lower level services is a big brand extension and whether this will work is unknown. Also there are a multiple of UK City and Regional firms that already do this work, so A&O is not exactly creating a new market here, but trying to defend its position from the non-Magic Circle firms that are challenging it.
Interesting too is that the move is alot about moving back office staff and so reducing A&O overheads; the bit about saving clients money is kind of secondary and for the future. The initial savings are to be for the Partnership and I guess clients if they can manage to negotiate well on fees.
The wider background is interesting too, the Legal Marketing Act comes into force this year and it is expected that Accountants, Consultants, Private Equity and Large outsources are going to try and move on the UK legal market; this is one of the first steps taken to try and pre-empt this move. Hopefully one of two law firms will go down the route of listing on the FTSE so that we can have a play with their stock too.
Belfast must be a happy place though, all these high value services moving to the Province can only be a good thing for its local economy.