Leeds is England and Wales' largest legal centre outside London. It is home to the strongest regional – and now largely national – firms and presents London firms with serious competition for quality commercial work.
"We've been saying that Leeds is the biggest legal centre outside London for 10 years," says Philip Mudd, managing partner of Walker Morris, one of the Leeds 'big six'. "It has probably been true for the past five."
But why Leeds? Birmingham is Britain's second city and Manchester is traditionally a larger commercial centre. It is a question that attracts an infinite number of answers, but there are several factors behind Leeds' expansion that give it an advantage over its bigger rivals.
The roots of the city's expansion lie in the 1980s. On a macro level, according to Addleshaw Booth & Co managing partner Mark Jones, was the earlier realisation that many of the city's traditional industries, such as textiles, were dying.
With the help of the city council, the economy diversified, with financial services leading the way. This attracted other professional services, such as the big accountants, retail and merchant banks and venture capital companies.
Benefiting from the exponential growth of the building society sector – a traditional strength of Yorkshire – since the liberating Building Societies Act of 1986, Leeds has become the financial capital of northern England.
Consequently, Leeds was more hardy during the recession than other northern cities – and local law firms reaped the benefits.
Leeds practices are quick to dispel the image of parasites enriching themselves on the city's burgeoning economy.
"The firms brought in much of that work themselves," says Mudd. "It is a combined success story in partnership with business."
Neil McLean, newly-appointed managing partner of Dibb Lupton Alsop's Leeds office, points to the 1988 Dibbs-Broomhead and Hammond-Suddards mergers as turning points.
"We saw the need for big firms that could provide a range and depth of service before the market did," he says. "Since then, growth has been exponential. No other city has the same concentration of big hitters as here."
The result was a hugely competitive market, which still remains. That led, in Mudd's words, to "all of us raising our game". "Since then, this growth and competition has created a gravitational pull of work to Leeds," he says.
The other, more tangible advantage that fuels the growth of many Leeds firms is the bulk processing departments – particularly debt recovery – that provide a steady and substantial income stream with which to invest.
All this has left Leeds' big six – Addleshaw Booth, Dibbs, Eversheds, Hammond Suddards, Pinsent Curtis and Walker Morris – in a position where they are serious competitors for London work.
In addition to their local rivals, most now see the middle-tier London firms as the main competition. The recent pronouncements by Bupa and SIF that they will increasingly place work away from London is only part of a trend that the Leeds firms have happily noticed over the past decade – and they expect it to continue.
The obvious attraction in the first instance is the price differential. Partner charge-out rates are typically £150-£250 per hour, compared with £250-£400 in London – the benefit of a lower cost base.
But the Leeds firms claim they can offer other advantages too. The national firms cite their strength in depth and all emphasise the greater degree of partner involvement that regional firms can offer.
"We've proved we can do the top-level work," says David Ansbro, managing partner of Eversheds' Leeds and Manchester offices. "We're flexible, less arrogant and have our feet more on the ground than many London firms."
The deals have got bigger – the average deal in Leeds is now said to be worth more than £10m – and the client base of the big six has risen in profile.
Eversheds estimates that 90% of its clients were based locally five years ago. Now it says that proportion is only around half. Pinsent Curtis tells a similar story – five years ago, less than 25% of its clients were Ftse-350 companies. Now that proportion is more than 75%.
Many firms are also attracting an increasing number of international clients. Eversheds acts for US firm DuPont and Walker Morris for Geneva-based Caterpillar. Nigel Kissack, head of litigation at Pinsent Curtis, estimates that three of his firm's biggest clients are from the US.
He has an interesting theory as to why Leeds appeals to some international clients. "We have had a lot of success in targeting 'non-capital' work in the US – those industrial firms that are based in Detroit, Chicago, Cleveland and Pittsburgh," he says.
"Many dislike using New York or Washington firms and transfer that aversion when it comes to London firms. They also know, because of our location, that we understand manufacturing more than a City firm would."
But the move to improve the client base has led to some accusations that the big firms have taken their eye off their Yorkshire clientele, particularly the smaller listed and large private companies, of which the region has an abundance.
One firm that claims to have benefited is Lupton Fawcett, a long-established general practice with a growing commercial arm.
"Now that they focus on big new clients, a lot of the criticisms levelled at London firms are true of them – getting too big, costs too high, not enough partner involvement," says partner, Gary Salt.
This is a claim that most firms deny. They claim their client bases have 'broadened' rather than shifted. Ansbro argues that although the proportion of local clients has fallen, none of the 25 that have dropped out of his firm's top 50 have actually left the firm.
Addleshaw Booth is also keen to remain close to its traditional client base. Indeed, one of its target markets is private companies. Jones cites the example of Airtours, a client of 30 years, as one reason not to abandon the smaller client.
"When Airtours started, it was just two shops in Lancashire. It is up to us to work out which companies have this potential, which is why we have linked up with Ernst & Young to sponsor the 'Entrepreneur of the Year' competition. It is not just major plcs we advise."
The expansion of the client base and the flow of work from London has led to an increase in the range and quality of work in Leeds. "The quality is similar to London, albeit with fewer noughts on the end of deals," says McLean.
All report that work levels are increasing across the board, but corporate finance, PFI, venture capital and IP seem to be particularly strong.
The Leeds market is therefore a very difficult one to pin down. There are in fact two markets – regional and national – as well as clients that fall in between, such as Halifax or Asda, Yorkshire firms that have grown to national status.
The Yorkshire market is also no longer as distinct from the northwest as it once was. The accountants and banks increasingly see it as one northern region, as did Manchester firm Addleshaw Latham and Leeds' Booth & Co when they joined forces two years ago.
"That was a large part of the thinking behind our merger," says Jones. "Increasingly there is one northern region based on the M62 corridor which includes Leeds, Manchester, Liverpool and, to a lesser extent, Hull."
This appears to have been the last major merger for a while and the position of the top six appears unassailable. In the longer term, the trend is expected to be similar to that predicted for London – a top-tier of full-service firms, a number of niche boutiques, possibly some mid-sized single-sector national firms such as Beachcroft Wansbroughs and very little else.
"There will be a flight to quality," forecasts Jones. "The rich will get richer and will pick off specialists from firms where there is less opportunity."
Among the big six, the merger activity of recent years has left five firms in a position of being national, to varying degrees, and one, Walker Morris, solidly committed to a single-site strategy.
"We intend to stay that way," says Mudd, who draws a parallel with the centralisation of retail banking. "I think the national model has had its day. A single site does not mean a lack of ambition. Clients are very sophisticated now – they just want the best people wherever they are."
Walker Morris has responded to the national approach with the introduction to its clients of a new interactive, web-based IT channel called 'reach…'. It went online last month.
It provides a tailored service for major clients via the Internet that provides relevant legal developments and case histories, a search facility and access to time records.
"It is intended to fundamentally change the relationship between us and the client," says Mudd. "People want a partnership with their law firm and this puts the firm at their disposal on their desktop."
In time, the system will be developed to provide actual legal advice over the web via a secure link. Mudd also sees that the future lies in desktop videoconferencing. "We're going forward a step from the national firms. In future, it will not matter where a law firm is," he says.
The remainder extol the virtues of the national model. Some feel a gap will develop between them and Walker Morris but, conversely, many feel that Pinsent Curtis is still slightly lagging behind in Leeds since Simpson Curtis's 1995 merger with Pinsent & Co.
"Not equal to the sum of its parts," is a typical comment. Kissack does not accept the criticism, but admits that the firm has not worked hard enough on its public relations. "Some clients tell us that we don't have a strong profile," he says. "We are looking to change that. A reputation is increasingly important."
The national firms also emphasise the importance of a London office as a gateway to large corporate and international clients. As one partner mutters: "A lot of Americans think London is England."
The latest firm to open there is Addleshaw Booth, which established a foothold in Cannon Street last November in response to specific client requests, particularly from Sainsbury's.
Jones emphasises that, with only three partners, it is not a full-service office and that Addleshaw Booth will remain a 'northern' firm, but adds: "There is no doubt that this is not Addleshaws' ultimate statement in London."
What is also clear is the increasing need of clients, even the smaller ones, for advice in Europe. But, again, there is a dichotomy of approach between the big firms – except that here Addleshaw Booth is in the same camp as Walker Morris, preferring the Slaughter and May 'best friends' model rather than seeking alliance and merger partners.
Both firms prefer the flexibility it offers and hold strong reservations about formalising links. "Mergers are very expensive and cut off your lines of referral," says Mudd.
"In any case, we find that many international firms manage their own portfolios of firms in each jurisdiction. You don't need that level of formalisation to work effectively in Europe. I would also question how cohesive their networks will be across all the different cultures."
Elsewhere, the race is on to find European partners. As Legal Week reported two weeks ago, Pinsent Curtis has agreed a merger with German firm Schurmann & Partner. Dibbs reports it is seeking alliances leading to merger and is in talks at present. Eversheds is also understood to be in talks and Hammond Suddards' ambitions in Europe are well-known.
"We monitor the European and international work of our clients," says McLean. "I'm constantly amazed by the amount of European work that they do.
"We talked to many of them and what emerged was that they want a similar level of service and outlook abroad. We are looking for like-minded businesses with the same approach and quality so that it will look and feel like a Dibbs operation abroad."
Eversheds' Ansbro agrees: "Linklaters isn't daft. In five years' time, it will be simply be expected that a firm has strong links in Europe under its own name."
So the inexorable march of the Leeds firm goes on. "I'm not being complacent," says McLean, "but I can't see where the growth of Leeds is going to stop."