It's starting to look like we have entered the realms of competitive restructuring. Clifford Chance starts with a redundancy and capital call, Linklaters throws a partnership restructuring into the mix and then Freshfields comes up with a salary freeze. So Allen & Overy's (A&O's) options to go one better looked somewhat limited, but they managed it by matching all of the above and raising it with a freeze in billing rates at 2008 levels (we'll get to that later), hiving off private client and reviewing the positions of 35 equity partners. Short of shutting the banking practice, there wasn't much left on the table.

It has to be said that in terms of candour, A&O sailed a touch close to the wind on this one. While rightly being careful to avoid pretending that cuts were being ruled out after news of the Hong Kong restructuring emerged, the firm avoided questions regarding specific claims that were put to it relating to a partnership restructuring (three weeks ago), a formal redundancy programme (two weeks ago), and a pay freeze (last week). Set against that, A&O was admirably forthcoming when it came to announcing the full details yesterday and, obviously, it's very difficult to be open when such sensitive internal issues are under consideration.

The good news is that the actual substance of what A&O has put together, which was agreed in a board meeting last Wednesday (11 February), holds up well. Where the firm has undoubtedly scored is in drawing all of its measures together – basically throwing everything and the kitchen sink at the recession. This makes compelling sense, allowing the firm to deal with costs issues in one shot. And by putting in place a range of responses, covering the entire firm and operating expenses, A&O can be said to have spread the pain evenly, with a genuine coherence.

The logic is that such a comprehensive package of measures will usher in certainty and allow the firm to move forward after one painful push. The odds look good – back-of-the-envelope calculations are that this package will achieve in the region of £140m of annual savings once reduced partner drawings are accounted for.

Also of interest is the drive to sell its package in terms of delivering value to clients, as Freshfields did when announcing its pay freeze. And A&O has gone one step further by committing itself to holding billing rates at least at 2008 levels. True, on a practical level this tactic be could be viewed as meaningless, as a firm of A&O's size will typically operate dozens of different billing rates based on client, geography, lawyer seniority and bespoke arrangements that are in constant flux. But as a gesture – and a statement of intent – it carries weight and will be well received by clients (Freshfields has had glowing feedback from clients on the pay freeze).

There is now no doubt that the debate over fees and billing practices has been transformed since the collapse of Lehman Brothers, and the more imaginative law firm leaders are moving to actively engage with that debate. If clients do not seize this moment to get genuine reform from their advisers they will have only themselves to blame.

The question, now that A&O has set a new scale for law firm restructuring, is whether it will be enough and how rivals will respond. To the former, the answer is: 'probably yes, but we'd better start praying if it isn't'. To the latter, it would be amazing if a Freshfields-style pay freeze wasn't widely adopted this year along with an absolute freeze on billing rates. Actually, there will be intense pressure to cut charge-outs for associates below three years' PQE, which would be an entirely healthy development for law firm economics.

If that seems a bit doomy, here's two elements of context. As far as I can tell, 2008-09 revenues at the majority of top 50 law firms won't be that far off on last year (though profits will). That's an earnings outlook most business would kill for right now. And if it's starting to look like City law firms are on life support at present, at least there are other patients in the ward. Results just in for Cravath Swaine & Moore show the Wall Street leader's profits were down 24% in 2008 while revenues fell 13%.