A decade of massive growth has seen the Northern Irish economy develop into one of the best performing regions in the UK. Figures produced by Pricewaterhouse-Coopers in Northern Ireland reveal that between 1989 and 1999, manufacturing output in the province grew by 35%, compared with 4% in the rest of the UK.
Unemployment has also dropped by 41% over the same period and more than 89,000 jobs have been created.
While the focus was once agriculture, food and textiles technology and financial services are now moving to the fore.
In the past decade manufacturing employment rose by only 1.3% with employment in the financial and business services sector growing by more than 53%.
The economic surge has brought with it a growth of mergers and acquisition (M&A) activity in the province. From 1993 to 1998, M&A transactions in Northern Ireland trebled from 20 to 64. In 1999 there were an estimated 70 deals. While this is small fry for the London market, it represents massive growth for a region the size of Northern Ireland.
Much of the growth in the economy has been fuelled by increased international investment in the province. Low operating costs and a strong infrastructure have attracted investment from the US. With the Good Friday Agreement two years ago and the peace process on track, this is set to continue.
The local law firms are reporting a significant increase in levels of activity. “There has been a tremendous release of energy since the peace process began,” says Angus Creed, the managing partner at the Northern Irish office of Arthur Cox.
“Companies are investing with great gusto now – there has been a surge of work. I very much think this will continue so we are only just starting – the community has a lot of catching up to do.”
Arthur Cox, one of the largest practices in Dublin, established a Northern Ireland office in 1996 following a merger with corporate banking, commercial and property practice Norman Wilson & Co.
Creed estimates that about 20% of the firms’ work is generated from international clients, with 80% coming from indigenous Irish companies from the North and South.
While the dealflow has increased in the province, Northern Irish firms are facing tough competition from London and national firms in England keen to feed into the booming economic conditions.
Whereas a decade ago few firms outside the province would have been interested in the Belfast market, the peace process, coupled with the booming economy, has attracted interest from the wider legal community.
And this interest is likely to increase as the corporate work in London and the US dries up with the economic downturn.
This year all but one of the Belfast firms were overlooked for the New Victoria Square urban regeneration project, which was won by London property firm Berwin Leighton Paisner. Arthur Cox was the only firm that was invited to tender for the work.
The changing nature of the economy is forcing the Northern Irish firms to rethink their client focus. “There has been a change in the legal market in the past few years,” says David Jamison, a partner in the corporate department at law firm Carson & McDowell.
“Four to five years ago, Belfast would have been perceived as providing a second-rate sleepy service,” Jamison says.
Jamison attributes the change to the developing nature of the economy and the opening up of the legal marketplace. He says it is the interest of the London and national firms that has provided the driving force for the change.
Faced with strong competition for the work, Northern Irish firms are stepping up a gear.
“If you want to participate in the marketplace you have to be able to give a 24-hour service,” said one partner at a leading Belfast firm. “There is a new tier of Northern Irish firms who are able to provide that City service.”
Creed at Arthur Cox says that while the firm faces strong competition from the London firms he believes that in the past couple of years it has become more successful in winning the work.
And he says that the firm is well aware of the need to market its services to the corporates based on the mainland.
Earlier this year the firm opened an office in London to assist it in winning work from the UK business seeking to invest in the province.
“It is often easier for clients to come into the London office and meet us there,” he says.
To match the quality of the London market, the Belfast firms are increasingly seeking to lure back Irish lawyers who have honed their skills in City firms.
But however good the quality of the lawyers, for larger M&A transactions some say that it may not be feasible for the Belfast firms to win the work.
Sheer size dictates that the firms do not have the resources to service some of the big deals.
Creed says that the size of the firm’s North and South office is an added advantage. “We are quite a large firm for Ireland with 150 lawyers and 40-50 partners. We have a depth of experience that is not covered by other firms,” he says. “While other firms may need assistance from London we have the resources.”
The other main Belfast firms are also building up numbers – Carsons has increased the headcount of its lawyers by 50% in the past five years.
Cleaver Fulton Rankin is another firm that has increased its size. Earlier this year it appointed five partners – a significant move for a Belfast law firm. Link-ups with the firms south of the border have also increased capacity.
But the size of the firms can be a selling point, says Jamison at Carson McDowell. The very fact that the market in the North is small in comparison to London means that the firms can deliver a better service to the client.
“A good deal for us might be between £10m-£15m while this is relative small fry for the corporate firms in London,” he explains. “This means that a client who might get an associate in London will get a partner in Northern Ireland. In 99% of cases we can deliver the same result with a better, more personalised service.”
Cost is also a selling point; with the price of office space still low, litigation, employment and general corporate advice can be provided at a far cheaper rate than the London firms.
And looking to the future, local firms hope to secure a stronger position in the marketplace.
As the political administration develops there will be more new legislation creating a unique legal framework in the province.
This will make it difficult for firms outside the province to ‘dabble’ in Northern Ireland, said one partner at a Belfast firm.
No-one knows for sure how heavily the global economic downturn will hit the province dependent as it is on significant inward investment from England and the US. For the time being, law firms are reporting continued activity.
“Everyone is reasonably busy. On the whole, commercial business is probably busier,” says Jamison at Carson McDowell. “No-one is feeling the pinch at the moment.”
But whether or not the Irish economy is hit by the economic downturn as the global economy falters Northern Irish firms are likely to face greater competition from London and US law firms keen to take a share of work.
“Everyone is watching the situation closely,” Jamison says. “When there is a downturn in the [mainland] UK marketplace you can almost set your watch by the increased level of interest by the UK firms.”
The in-house community in Northern Ireland
Let’s be clear: there are very few lawyers working in-house in Northern Ireland.
Initial enquires with the Law Society of Northern Ireland put the figure at five. Subsequent enquires with the Law Society established that there are in fact 77 in-house lawyers working in commerce in the province.
A significant number of those lawyers work in banking, reflecting the growing financial and business services sectors in the province.
The large proportion of lawyers who are not in private practice are based in the public sector. They currently number about 180.
This reflects the balance of the economy; even now the North’s public sector accounts for some 33% of employees and public expenditure is equivalent to 60% of GDP, according to figures produced by PricewaterhouseCoopers in Northern Ireland.
The scarcity of lawyers working in business is hardly surprising, given that only 3% of companies in the province employ more than 100 staff.
And many of the international groups which have invested in Northern Ireland rely on in-house lawyers based in Dublin or on mainland UK.
Predictions are that the numbers of in-house lawyers will grow in the coming years as both Irish companies and international groups recognise the benefit of taking a local lawyer on board.
