Charge out rates going up but balance of power begins to shift
Legal Director poll
August 07, 2002 at 08:03 PM
3 minute read
Law firms have continued to raise their charge out rates during the past six months despite declining market conditions and heavy resistance from clients, according to the first Legal Director e-mail poll of top UK heads of legal.
But the poll shows that clients are moving away from hourly billing rates and calling on their advisers to be more creative in their billing. The poll questioned heads of legal at Ftse corporates and financial institutions about law firm billing.
Twenty-five Ftse 100 heads of legal responded.
More than a quarter of those that responded said their primary legal advisers had pushed up their hourly billing rates during the past six months, with only one head of legal saying that the charge out rates had gone down.
And while more than half (56%) said charge out rates had remained the same, a significant number noted that a rate freeze had involved "hard negotiation" on their part.
More in-house lawyers are calling on law firms to move away from hourly charge out rates, with an impressive 64% of the top UK corporates having approached their law firms about alternative billing arrangements in the past six months.
And there are signs that tough market conditions are shifting the balance of power between clients and their law firms.
Forty-four percent of those that have approached their firms about alternative billing found that they had been slightly more receptive than last year, with 10% saying their outside advisers had been far more receptive.
The poll also reveals that among the top corporates there has been a shift away from the traditional hourly charge.
More than two-thirds of the Ftse 100 clients said that they will be asking their law firms to improve value for money ahead of cutting rates. Only two respondents said that they will do neither.
Examples of value, included asking law firms to "give discounts the more we spend with them", providing free training and secondees.
Law firms that fail to respond should take heed from the view expressed by one Ftse 100 general counsel who said that they had tried to negotiate on value with their law firms to "no avail".
"Instead we have taken the alternative approach of paying market rates for in-house lawyers and are trying to cover as much as possible internally," he added.
However, Ftse 100 counsel remain reasonably positive but guarded about the level of service they get from their advisers.
More than two-thirds of those who responded said that the fees charged by their law firms 'mostly' – although none said that they 'always' – represented value.
However, an astonishing 20% of Ftse 100 heads of legal said that they rarely or only sometimes got value for money.
Legal Director will be running a monthly e-mail poll of top in-house counsel on key issues to lawyers working in business. Each month there will be a maximum of three questions. If you are interested in participating, please contact Mary Mullally at [email protected]. All answers are confidential.
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