The City rumour mill just won't leave Shearman & Sterling's London arm alone, with claims once against flying around that the practice has lost both its direction and the favour of head office.

While much of the City has enjoyed the current surge in M&A activity, the London office has struggled to make an impact after losing two high-profile M&A partners to US rivals within nine months. The departure of Adrian Knight to Skadden Arps Slate Meagher & Flom in December was put down to a lack of integration with Shearman's wider practice. But the recent move of Jonathan Coppin to Hogan & Hartson is harder to spin, since Coppin had been billed as a central component of Shearman's European corporate practice. Now a firm that wanted to have at least five UK M&A partners has just two.

As one partner at a magic circle firm comments: "Shearman's London office is successful and it is definitely credible, but strategically, it is not threatening. A few years ago it was a threat."

Few are blaming longstanding managing partner Kenneth MacRitchie, who is credited with building the market-leading position the office enjoyed for so long. But while respected by partners, some would argue MacRitchie's no-fuss style has not helped deal with a reputation for poor associate morale. The problem was acknowledged in the firm's decision to be one of the first in London to bump up salaries for UK lawyers when in April it agreed a 20% pay hike. But it still has a poor record for making up UK partners.

The attempts to build out its practice have also been slow. Ex-Ashurst heavyweight Ian Nisse remains the sole real estate partner and Shearman has been looking for litigation partners since the departure of Chris Colbridge to Kirkland & Ellis last year – leaving arbitration partner David Reed, who transferred from Paris, to fill the gap.

The more established finance practice appears on stronger ground, having shipped in Allen & Overy's Julian Tucker last year to lead its structured finance push while home-grown Patrick Clancy made partner late last year.

Rivals have long speculated over the intentions of leveraged finance partner Anthony Ward, but Shearman remains confident that Ward, who recently took a place on the firm's main policy committee, will keep the faith. The firm remains a serious player in projects.

None of which will be sufficient to get Shearman on the front foot without its corporate practice stepping up several gears. With ex-Linklaters man Peter King and this year's recruitment of Norton Rose partner Laurence Levy, Shearman has polished technical lawyers. What it lacks – in particular since the departure of Knight – are at-the-coalface deal partners and natural business winners.

The firm is, as ever in recent years, hunting for hires, but with Shearman's profits lagging behind those of Wall Street rivals, recruitment has become tougher. At the same time, an unsettled period for Shearman's New York practice has not helped the firm to plan. Yet if New York has contributed to the malaise, it seems the firm's notoriously cyclical US practice also presents the most realistic chance of turning the ship around. Even critics concede that the US practice is on course for a much-improved 2006 on the back of a series of big-ticket instructions. And after all, there is nothing like money to silence the gossips.