London's elite firms will attempt to head off a knee-jerk pay war in the wake of Allen & Overy's (A&O's) 15% assistant pay rises with the magic circle's pace-setters hoping to put the issue on hold until the spring.

As Legal Week went to press, Linklaters and Freshfields Bruckhaus Deringer indicated that they intend to resist short-term pressure to hike salaries in the wake of the surprise move by A&O, which announced its rises last Thursday (12 October) as part of a major review of its career structure.

Ashurst, Herbert Smith, Simmons & Simmons and CMS Cameron McKenna will also attempt to avoid an early move on salaries.

The measured stance from the City's legal elite makes it increasingly likely that A&O's rises will not spark short-term pay hikes, although firms concede a similar move from another major firm would significantly alter sentiment.

One Camerons partner commented: "The market is not going to grow by 15% over the next year so it is not healthy to put up over-heads by that much. At some stage the music will stop. You will have to put up charge-out rates as well."

Ashurst managing partner Simon Bromwich told Legal Week: "We feel comfortable that our total reward package is competitive and the intention is that it will be reviewed for 1 May."

Slaughter and May, Clifford Chance (CC) and Lovells are all reviewing their positions. Slaughters is regarded as the most likely to make a significant move before the end of the year but an uplift from CC would have more of an impact on the City recruitment market.

Scepticism over the details of A&O's package and the firm's decision to defer its new bonus scheme has increased expectations that rivals can wait for the dust to settle before taking a view on salaries in the spring.

However, partners increasingly concede that there will be substantial increases next year as firms fight to recruit quality associates to cope with the current booming M&A and securities markets.

Another rival commented: "The issue A&O is trying to grapple with is a difficult one, and I am not sure any of us have the right answer. Increasing pay is only a short-term solution."

One Freshfields partner added: "It is an interesting move to defer some payments as a lot of firms moved away from that a number of years ago. But it is always a mistake to think you can lead the market because others will respond and then you lose your advantage."

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