London’s most prestigious law firms are facing significant financial and strategic obstacles as they attempt to establish themselves in the highly competitive New York legal market.
Breaking into the US has been on the agenda of many elite English law firms, most notably four-fifths of the magic circle, but building a brand in New York requires spending a lot of cash.
There are two dominant global hubs where law firms can truly thrive: London, buoyed by English soft power, and New York, the beating heart of American corporate law.
Elite US law firms moved aggressively into London over the past decade and reshaped the City market, but reversing that flow across the Atlantic is proving far more difficult for British firms.
Some firms have pursued growth through mergers, with Allen and Overy combining with historic New York-founded white-shoe firm Shearman and Sterling in 2024, and Hogan Lovells recently merging with one of New York’s oldest firms, Cadwalader, Wickersham and Taft.
Others, including Freshfields, Linklaters, and Clifford Chance, have chosen organic expansion by opening offices and recruiting high-profile lawyers away from established US rivals.
This week, Linklaters revealed it had hired two of FIFA’s lawyers from Paul Weiss’s New York office to strengthen its litigation, arbitration and investigations practice.
The challenge with organic growth is the enormous capital required to attract the calibre of talent needed to compete at the top of the American market.
Max Campbell, a New York-based headhunter, said: “Where US firms entering the London market were able to attract recognised talent with large compensation packages, magic circle firms have not been able to do the same as easily in the domestic US market.”
City lawyers are among the highest-paid professionals in the UK, with the most junior lawyers at top firms now earning between £150,000 and £180,000, while average profit per equity partner at magic circle firms ranges from £2m to £3.5m.
However, those figures pale against New York standards, where Big Law average partners take home between $5m and $12m annually, creating a stark compensation gap that British firms must bridge.
This week it was revealed that senior partners at Freshfields were forced out as the firm focuses on boosting growth to fund its US expansion.
Nick Woolf, partner at Woolf and Co, said: “The reality is that firms competing at the very top of the US market need greater flexibility to reward their highest-performing partners. Traditional lockstep systems can struggle to accommodate that. What we are seeing is the continued influence of US compensation practices on the leading UK and international firms.”
Freshfields also introduced a strict performance-based compensation system last year, stripping equity points from long-serving European partners in a bid to remain competitive with New York rivals.
Woolf added: “Freshfields is effectively acknowledging that the economics of the global legal market are increasingly being set by the US firms. Once you decide to compete for the same talent, it becomes very difficult to maintain a compensation system built for a different era.”
The pressure to compete in New York means more City firms will likely undergo fundamental restructuring of their traditional compensation models in the months ahead.
Campbell warned: “Without either sufficient domestic brand recognition or requisite capital to compete with the large offers from leading US firms domestically, decisive strategic expansion through the hires of top talent is very difficult.”