Nearshoring to Northshoring
It’s not just AstraZeneca and the television channels (BBC, ITV, Channel 4) moving North, the ‘top 20’ law firms that accounted for much of the legal professions recent growth, are condensing their pricey London hubs for a cheaper regional base. The remit of these regional centres now spans back-office support tasks, to fee-earning, to ‘flexible resourcing divisions’, allowing firms to combat spikes in demand for legal work.
Allen & Overy and Herbert Smith Freehills were two of the first international firms to kick start the ‘nearshoring’ trend by establishing support centres back in 2011. Many have since followed suit, including Ashurst in Glasgow, and Baker and McKenzie’s services hub in Belfast. Transferring parts of their business, IT processes or operations employees overseas, reduces the overheads of the ‘engine room’ whilst retaining an acceptable level of service.
A recent report from commercial property consultancy CBRE shows that demand for central London office space in the legal sector has risen by a third in the last two years (2014-2015). At the same time, firms are continuing to outsource or ‘Northshore’ functions to regional offices. In the last 12 months there has been a focus shift in the function of these regional offices, from back–office support tasks to fee-earning, citing Hogan Lovells’ plans to double its lawyer count in Birmingham by the end of 2015, Simmons & Simmons’ sharp hike in its Bristol head-count, and the Mancunian invasion of BLP, Latham & Watkins, and now Freshfields.
The biggest costs of law firms after salaries, is high property overheads, which makes this move a ‘win win’ for the bank. So what does this mean for London based lawyers and aspiring trainees? Does this reduce diversity at the top end of the legal profession? Well, in short, no. Firstly, anything that can reduce client costs without sacrificing quality must be a good thing. Contributing to high City costs are menial tasks which could be done for a fraction of the price in the regions. Secondly, it would be foolish to assume that offering training contracts, or indeed qualified position in the region, would decrease diversity in the City. Including a portal for regional talent to move to the City can only have the opposite effect. It is a narrow-sighted firm that refuses to promote a quality lawyer simply because he started out in the regions. Thirdly, insourcing keeps investment in the UK, rather than overseas, delivering and much needed boost to the regions whilst decentralising the economy- which can only be a good thing!