Customers enter a branch of Barclays Bank, the UK’s third-largest bank, in central London. UK banks are increasingly asking law firms to lend them lawyers for free.

UK banks such as Royal Bank of Scotland Group Plc, Barclays Plc and HSBC Holdings Plc are increasingly asking law firms to lend them lawyers for free as they’re forced to cut jobs in their legal departments.

UK banks have cut thousands of jobs as they grapple with the worst financial crisis since the Great Depression. Hundreds of lawyers in bank legal departments have been fired and others are having their pay frozen or cut, said Scott Gibson, the director of legal recruiter HughesCastell Ltd. in London.

“In-house orgs are thinking, we have fired a lot of people, why don’t we just get the people in who will do that work cheaper?” Gibson said. “In a downturn, organizations want to get lawyers to do things cheap.”

While loaning lawyers to clients isn’t new, requests have risen sharply during the recession. As much as 25 percent of some banks’ legal departments may be staffed by lawyers on loan now, said Andrew Darwin, the managing director of Europe at DLA Piper LLP, the world’s largest law firm by number of lawyers.

“Of the clients I’m closest to, the biggest UK banks, the legal teams are clearly being impacted by the general downsizing,” said Darwin, whose clients include RBS, HSBC, Barclays and Lloyds TSB Bank Plc. “I suspect we haven’t seen the full impact on them.”

Law firm incentive

Firms are keen to loan out lawyers while work is slow because it helps them maintain good relationships with clients, said Tony Williams, the former managing partner of Clifford Chance LLP and a consultant at Jomati Consultants LLP.

“A year or 18 months ago, it was almost impossible” to loan out lawyers because firms were too busy, Williams said. Now, UK firms have about 40 to 50 lawyers on loan at any time.

London-based HSBC has cut more than 7,300 jobs this year, Barclays 5,200 and RBS more than 9,000. Barclays’ spokeswoman Gemma Abbott and HSBC spokesman Tim Pie and RBS spokesman Michael Strachan declined to comment on secondments or firings at in-house legal departments.

“You’ll find secondees from one firm working for secondees at another” in a client’s legal department, Darwin said. “We may find ourselves doing work for an Allen & Overy secondee.”

Magic Circle

UK law firms are also struggling, being forced to slash lawyers, staff and salaries as mergers and financing work dried up last year. Three of the so-called Magic Circle firms, London’s largest by revenue, have cut jobs. They include Clifford Chance, Allen & Overy LLP, and Linklaters LLP.

During a typical secondment, a salaried lawyer with at least five years experience is loaned to a client for about six months. While the salary is often split, companies are increasingly asking firms to pay the entire amount, said Laurie Robertson, the global head of business development and client focus at Clifford Chance.

“We hear from clients that are saying ‘Can you help us out?’” Robertson said. “Clients are facing pressures on the costs of their legal departments and obviously getting help from a law firm from a secondee helps.”

Clifford Chance, the largest UK law firm by revenue, now has about 125 lawyers on secondment to clients or regulators, 20 percent more than the same time last year, Robertson said.

“Most clients’ legal departments are under pressure from the CEO to reduce costs,” Robertson said. “Banks are the biggest users of secondees anyway, so they’re the ones that are also looking for help at the moment.”

Source: Bloomberg