In my previous blog in the summer of 2022, I wrote about the unprecedented economic situation facing the country that has been driven, in large part, by Vladmir Putin and the war in Ukraine. Inflation is a powerful weapon against your enemy. Not since the late 1970s has the UK experienced stagflation – that deadly combination of rising interest rates and rising inflation drastically eroding the value of our take home pay.
Rapidly rising inflation in food and energy has eroded our take home pay significantly and sadly impacts the poorest in society most of all. The Governor of the Bank of England quoted in City AM that if the Bank of England does’’ too little with interest rates now, we will have to do more later on’’. ‘’The experience of the 1970s taught us that important lesson,’’ he said. This references the dynamic in which businesses hiked prices to offset soaring energy costs, prompting workers to demand pay rises, forcing firms to raise prices still further.
Alas, inflation keeps rising…. Food inflation was 19.1% in first quarter of the year – the fastest for 40 years – albeit after years of very low inflation due to food becoming cheaper to produce on an industrial scale. There have been of course severe environmental implications of this cheap food, yet we all love a bargain when we are looking to save money in supermarkets. Budgeting and saving money have been reality for most people including many lawyers this year.
Ultimately, inflation leads to higher salary demands across all sectors of the economy and lawyers including my in-house candidates have been no exception. During much of 2023, budgets for in-house lawyers were having to be broken to ensure the right talent with the required skill set was appointed. Numerous companies and clients of Chadwick Nott awarded two separate pay rises or high one-off payments to their in-house teams to help with the cost of living. At this time the availability of good candidates remained scarce in lot of sectors, with the ever-increasing salaries at leading law firms making in-house moves difficult to achieve.
2023 has seen a distinct change in the last 2 months…..the effect of rising interest rates and the increased difficulty of raising finance has resulted in two leading City law firms making redundancies within their corporate department. Also, there has been a rise in interim in-house lawyers who have finished a contract recently and found little available in the market. Market forces will always find an equilibrium at some point and some candidates have overplayed their hand at times in my opinion. The over inflated salaries we had seen are not the norm right now.
Every role has a salary range that is going to attract a certain level of experience to undertake the job. This can vary as the legal job market changes, and I spend a fair amount of time updating hiring managers and in-house lawyers on the latest market conditions. I often aim to present a range of lawyer candidates with different salary levels to my in-house clients to demonstrate the market rates for different skill sets. A company’s openness to remote working and hybrid working are still influential factors for in-house lawyers. The in-house market in 2023 has seen banks, insurance brokers, insurance underwriters and asset managers demand 3-4 days per week in the office with regular checks being made. The demise of Credit Suisse earlier this year has focused the minds of employees to tow the company line to preserve their roles – let along demand more pay. One leading Investment bank has just returned to 4 days per week in the office. Consequently, the ability to drive up salaries certainly appears to have run out of steam for the moment in the in-house legal sector.
Obviously, continuous public sector strikes for higher wages have been the recurring theme for the last 12 months, but with only a few pay settlements reached.
In summary, for the mainstream in-house roles where we are seeing greater volumes of corporate and commercial lawyers available, it may become more of a buyer’s market for talent. Having said that and despite the challenges in the economy, there continues to be shortages of skill sets in several areas of the law. Uncertain times require bold decisions and strategies to maintain profitability in any business and top talent is definitely still in demand. No company pays more than it has to in order to attract the talent that it requires, but top in-house talent with certain skill sets and specialist skills sets are often able to be more demanding in terms of salary and overall package demands.
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