For Americans, nonstop headlines detailing the dysfunction of Brexit can be a welcome distraction from our own ongoing domestic turmoil. The story is anything but academic, however, for U.S. financial firms, policymakers and law firms that have made substantial investments in London in recent years.
While few of these firms are willing to talk openly about their future in the city long established as Europe’s financial hub, signs point to a pause in growth—not to an exodus—among U.S. law firms. Some may even be finding ways to capitalize on ongoing Brexit confusion.
The U.K. did not leave the European Union on March 29, its original deadline for departure, with Prime Minister Teresa May unable to secure support for the withdrawal agreement she negotiated with the EU from enough members of her Conservative Party. Now, she’s looking across the aisle to Labor for help. She’s also seeking another extension with the EU to avoid crashing out of the bloc without any deal.
“There’s no doubt what’s happening in the political arena is a pantomime, and that’s an insult to pantomimes,” said Jomati Consultants principal Tony Williams, the former managing partner at Clifford Chance.
Williams insists that, regardless of how Brexit is ultimately resolved, London’s status as a global financial capital will not vanish.
“The concern is: Do some elements gradually drift away to other centers in Europe or New York?” he said. “I think London is robust or strong enough to weather some period of instability.”
The length of that period and what follows it, however, are real concerns to the nearly 20 U.S. firms with over 100 lawyers in London, the significantly larger pool with more than a dozen lawyers, as well as the vereins and partners in recent trans-Atlantic mergers whose U.K. numbers are well into the hundreds. Research from The American Lawyer’s U.K. affiliate Legal Week showed that at the end of 2017, the 50 largest U.S. firms—excluding the trans-Atlantic vereins DLA Piper, Norton Rose Fulbright and Hogan Lovells—were home to more than 1,500 partners and almost 3,500 additional lawyers in London.
“By and large, the message from U.S. firms is, ‘We don’t like the uncertainty,’” Williams said.
But that doesn’t mean any are pulling up stakes or moving preemptively to shift attorneys to Frankfurt, which has been floated as a winner if London loses its clout in the financial sector. Home to the European Central Bank, the German city is a mere fraction of London’s size.
Some U.S. firms might even take advantage of the uncertainty to pick up talent while the competition sits on their hands. Williams noted that many American firms were being more “forensic” in their approach to lateral hiring in recent years, focused less on numbers and more on identifying top practitioners in strategic areas.
“Those who have grown rather aggressively—Kirkland, Latham, White & Case—will probably continue to hire if they find absolutely the right people,” he said.
Representatives from Kirkland, Latham and roughly a dozen other U.S. firms with substantial London operations were unwilling to talk to The American Lawyer about their expectations. But Reed Smith London managing partner Andrew Jenkinson, who oversees more than 300 attorneys in the office, emphasized in a recent conversation that the underlying fundamentals in the U.K. economy are strong. That’s on the heels of several very strong years for the firm, following the initial Brexit referendum in June 2016. Jenkinson said that he was relieved that he pushed aside his initial fears about the impact of the vote, particularly on the firm’s transactional practices, as demand in commercial real estate, M&A and finance has been unusually brisk.
“If we had done anything with our staff at that moment, we never would have been able to have benefited from the uptick in that work,” he said.
Jenkinson’s colleague Tamara Box, the firm’s managing partner for Europe and the Middle East, added that the firm is currently being buoyed by clients seeking advice on the moving parts of Brexit.
“The need for regulatory advice in an environment where everything is up in the air and it’s all to play for is pretty acute, particularly in a regulated environment,” she said, highlighting the finance and energy sectors in particular. “There’s far more demand than there is supply.”
Box continued that the regulatory work also opens the door to transactional opportunities.
“As you are advising on what you need to do to set up shop in Europe, that’s a regulatory question, but it very quickly becomes an operational, corporate and transactional question,” she said, pointing to the intricacies of buying real estate and structuring a new business.
A spokesman for White & Case also highlighted that firm’s success in the market over the last several years and said the firm’s 2020 strategy prioritizes growth in both the U.S. and London.
“Brexit continues to cause uncertainty in the UK economy. That said, London is key to the work we do for our clients globally and the global nature of our practice should help form a natural hedge against issues like Brexit,” the firm offered in a statement. “London is also the centre of excellence for our English law work, and the importance of English law in governing cross-border deals and disputes should be unaffected by Brexit.”
Gus Black, global co-chair of Dechert’s financial services group, acknowledged that a number of the firm’s clients are feeling pain from the ongoing uncertainty. But he emphasized that the roughly 150 attorneys in the firm’s London office have a global portfolio.
“If you look across all our practices, we don’t think about London versus the rest of the world, we think about how we support our clients: international businesses, private equity firms, private credit firms, corporates, doing business in lots of different places,” he said.
Black gave the example of his own private funds formation practice, representing fund managers based in London who are raising funds in Europe and all around the world and said it was the same for his colleagues.
“Those London-based attorneys are basically engaged in helping clients pursue their business objectives on a global scale. What is happening in the U.K. market is only a piece of that,” he said. “If we were a purely U.K. firm doing English law, [Brexit] would be a greater concern.”