Observant readers will have noted that I was in London all last week and so, as is our custom, a few observations about my time and conversations there and the state of the market.
This has taken me awhile to compose because, frankly, I came away with a wide array of impressions, mostly influenced by the views of whatever firm I had just seen. (This tells you right there that you’re searching for a through-theme without notable success–and when your week includes 14 meetings in four days, it can be a real head-scratcher.)
Nonetheless, a few overall conclusions are possible. First, and oddly and purely by happenstance and not plan, on this trip I met only with UK-based firms–normally it’s a mix of US and UK-based, of course. So a note to the reader that they may color what I’m about to report.
My overriding impression? A sense of unfocused anxiety, or, perhaps more precisely, the omnipresent question, “What’s next?”
This is understandable, and let me hasten to add for the benefit of all readers but primarily my UK colleagues and brethren, that (a) this is understandable given what the Great City has been through the past decade or so; and (b) one view would say it’s healthy, prudent, and not irrational.
By contrast to what’s happened to the UK firms over the past decade, US (and New York) firms have had it easy. We have Trump, to be sure, but they have Brexit. However long Trump is Our President, be it a foreshortened first term (say what, Bob Mueller?) to the full ghastly eight-year max-possible span, he will not be President as far as the eye can see. But Brexit will be Brexit for a good long time.
A few words about Brexit, primarily for the benefit of the US or non-UK audience: Vastly more sophisticated analyses have been written than what;s about to follow, but consider this “Brexit 101” for those who haven’t been paying full-time attention.
First, when the UK went to the polls in June of 2016, it was clear that voting “Remain” meant just that: A simple declarative choice to continue business with the EU as usual. But “Leave” (or “Brexit”) probably meant a multitude of things to its supporters, everything from relatively simple and non-revolutionary actions like getting back some sovereign control of the border, to renegotiating the taxes and fees imposed by Brussels, to full-bore divorce. Thus it has been left to the politicians to define what Brexit actually does mean, and koanic incantations that “Brexit means Brexit” have not leant clarity.
So there’s just plain enormous uncertainty in the City over what form Brexit will ultimately take by the self-imposed deadline of March 2019. Will financial services employees continue to enjoy “passporting” to and from the EU? Will the major global banks and investment banks relocate material portions of their operations to Amsterdam, Frankfurt, Paris, Milan, Madrid, or god-knows where else? Will UK law continue to be a viable and compelling choice-of-law for international transactions? ,
Then there are the “merely” strategic questions facing the UK firms:
- What’s the value of our network of offices on the European continent? Asset? Liability? An overinvestment in retrospect or suddenly an essential bridge and point of entree to that economy?
- If [Major Financial Institutions] do substantially relocate to the Continent, will they become enamored of local firms and forget their good friends in London?
- And, all things considered, doesn’t this make the US a more attractive and even indispensable route of expansion for us?
Now, I don’t want to pile on in terms of rooting for my hometown ,but it’s plausible (I asked and people agreed) to imagine that the New York/London axis will grow even stronger in future. Several people even hypothesized that Amsterdam, Paris, et al. would come in a distant second to New York as the new safe haven for major financials and corporates. And there’s logic to that, especially given New York’s vast and sophisticated infrastructure of schools, cultural institutions, attractive residential neighborhoods, restaurants and nightlife, publishing, media, high-tech incubators, world-class hospitals, etc. Even lawyers and investment bankers, after all, would rather live in cosmopolitan and highly diverse cities than in a more provincial or government-dominated city..
We also speak English and have a perfectly respectable basis–New York law–for international transactions. What we don’t and never will have is the unbeatable time zone of London.
The problem with positing New York as the haven for London refugees from all sorts of industries is, for law firms, that it of course brings us squarely up against the last decade of US firms’ experience in London vs. UK firms’ experience in the States and especially New York.
To condense a decade’s worth of history into a sound=bite US and NY firms have been tremendously successful in London and the reverse is anything but true.
Remember where we came in? Somewhere between free-floating anxiety and a struggle with “what’s next?” The asymmetry of performance in transatlantic ventures cannot be comforting to contemplate. (This is not a judgment; it’s an observation about what has happened in two markets since the GFC.)
Another nasty complication, anyone? Lockstep is being questioned, dialed back, reformed mildly or radically, and is generally under assault as never before. Even though lockstep was really only adopted semi-widely in the 1970’s (the British firms having done fine for a few centuries prior without it), it’s always traumatic to question whether something deemed sacrosanct to many firms’ cultures is no longer fit for purpose. A problem US firms don’t have.
Finally, real honest-to-God transatlantic combinations are occuring: Gowlings WLG, Eversheds Sutherland and BLP Bryan Cave. These are serious big-league firms joining forces, which for many years was thought impossible unless it was going to be Freshfields and Davis Polk. (Funny how people have stopped talking about that–sanely, I might add.)
Don’t damn these combinations with faint praise, as I fear one UK legal publication did with the phrase “laudable realism.” Realism in the face of how many degrees of freedom the market permits your firm is in my book far more than “laudable”–it’s the starting point for compelling strategy. “Know who you are.”
So I suppose in retrospect I shouldn’t be surprised to have found myself coming away somewhat nonplussed at how to distill my impressions.
Yes, the UK firms have had a rough decade. But the other salutary development I found is that each is increasingly going its own way: The concept that there’s a monolithic Law Firm Ideal out there–lockstep, exporting UK law and work from London the provinces, acting for the largest and most prestigious institutions, is long since dead. But for some time the question has loomed, “What is to replace it?” (Or, simply, “What’s next?”)
Since, as you may have inferred, I count myself a realist, this in the long run may have been the happiest development of all.