It is certainly a sign of leaner economic times when law firms are happy to offer substantial fee discounts to major banking clients in the hope of seeing their name on a preferred list of advisers.

Consolidation and the bumpy equity markets of 2001 have shone the spotlight on cost-cutting in the banking sector and it was inevitable that a global legal spend of up to £150m would inevitably come under the knife.

And as new heads of legal assume powerful roles at those newly-merged banking giants, it is also natural that they would want to stamp their authority on spiralling legal budgets.

Credit Suisse First Boston (CSFB), ABN Amro, JP Morgan Chase and Citibank have all brought in new legal heads during the past year – and each bank has insisted on substantial discounts from its preferred UK advisers.

The result is that the City's top corporate players are having to ask some difficult internal questions with regard to the extent that they can low-ball on complex fee structures in the current economic climate.

Take Herbert Smith. Eighteen months ago it was approached by CSFB which wanted a substantial fee discount in return for a place on its panel. The firm – no doubt buoyed by a booming M&A climate – refused to budge, claiming that the fees demanded just were not economically viable. When approached for the second time two months ago the firm took the view that – with most major US banks moving visibly closer to the European panel system – a little flexibility was worth it to make the approved list.

To be fair to Herbert Smith, it did not experience a major drop in M&A work from the bank due to its strong ties with individual bankers who had the autonomy to instruct outside of the list. But such calculations shift as banks co-ordinate their spending powers under more formal structures.

Nevertheless, while the negotiating position of the top law firms has been weakened, don't expect the City's old hands to give away the farm. While CSFB got its discounts, both Freshfields Bruckhaus Deringer and Herbert Smith made sure their European arms were brought onto the bank's approved list for local work under the deal.

Everyone's a winner then, or at least firms such as Allen & Overy and Linklaters, which are increasingly rewriting the profitability rule book churning out mid-market banking work at bargain rates. Perhaps the only concern will be that corporates, which usually pick up most of the tab on M&A advisory work, notice the practice and start demanding a bit more flexibility on their bills.

But that just wouldn't be cricket.