Could the new Magic Circle NQ salaries affect the recruitment market in 2025?

In an earlier blog we discussed how the recent NQ salary rise by the magic circle (MC) has reduced the salary differential between them and the elite US firms to just 20%.  This is the lowest that it has ever been, previously the differential trended between 40% and 60%.

From recent press releases, it looks as though the Cravath Scale will stay the same in 2025.  Whether the US dollar continues to strengthen post the election is something to watch, but assuming the dollar does not deviate much from (£/$) 1.3, it is likely the differential will remain at 20%. 

Below we look at why this new norm could have knock on effects for the recruitment market and how it could impact lawyers in different talent pools in 2025.

Why could the market be impacted?

There is a general sense amongst associates that making a move to a US firm comes with an expectation that they will probably work more hours.  One recruiter I spoke to remarked that “associates are alive to differences in hours expectations.  Whilst expectations are high at the magic circle, working 2000 plus hours is not seen as the norm”. 

However, with a 40-60% pay increase, these extra hours were more than compensated for.  “You might work more hours, but you get paid a lot more”. 

Hours and salary are not the only considerations that associates have when making a move, but it is quite high up on the list.  A change in the differential will make the hours/salary trade-off less attractive than before.   As one recruiter put it “if the differential were to stay at 20%, it will affect associates. The incentive will just not be big enough for some anymore” 

US firms hire a lot of MC lawyers. If you look at the recent expansion of the Paul Weiss office, 25% of their new associate hires have been from MC.  We estimate that over a year c.100+associates move from the magic circle to elite US firms. 

This is a significant number from a concentrated source.   If the new salary differential does affect MC lawyers’ propensity to make such a move, then the number of MC associates that are open to considering a move to elite US firms would likely drop. 

This drop affects the supply of MC lawyer candidates for the US firms,  to ensure they are able to fulfil their hiring needs, they may need to source more from other talent pools.   

Below we look at six different possible sources of such associates: 

Silver circle and top tier international firms.

Whilst the Silver Circle and top tier international firms have increased their NQ rates, none have matched the Magic circle.  Anything less than £128k would mean there is at least a 40% differential to the top tier elite salary of £180k. 

Whilst hours expectations could be a cause for hesitation, (especially at some of the mid-sized international firms where hour expectations are more between the 1400-1600) it is likely the significant salary upside will ensure that there is still a flow of candidates from these firms.  Indeed, for lawyers at these firms, who are keen to make a move in 2025, they may find that there are more opportunities and less competition from MC candidates for the roles.  

Australian / New Zealand market

There is already a steady stream of lawyers moving from top tier Australian / New Zealand firms to London. The US firms compete with the magic circle/international firms for the lawyers with the specific skill set that they need. 

Some of these lawyers can achieve multiple offers and then have to make a decision.  Again, the hours/salary trade off comes into consideration and so the smaller salary differential, may impact some individuals thought process.

The flow of lawyers looking to move to London is unlikely to change, however where they end up may start to differ.   For an individual who has offers from magic circle and US firms, where previously salary may have been a key deciding factor, it may be less so.  Lawyers will focus more on other aspects.  One recruiter pointed out that brand has always been important for Australian/NZ lawyers and the magic circle have built a very good brand in that market. 

It is possible the new differential may mean some US firms find hiring preferred Australian/NZ lawyers more difficult in 2025.  They will need to ensure they are working with recruiters that are able to communicate their full offering and promote their brand effectively to the market.

Other elite US firms

Plenty of partners have moved from one elite US firm to another.   In fact, since 2018, 250 partners have made this move, and it appears to becoming a more and more well-trodden path.

Chart showing the number of lateral partners movements between US Elite firms in London

Recruiters familiar with associates at the US firms, are also seeing more associates looking to make these moves as well.   One recruiter pointed out that salary is not a motivation for such a move, instead the drivers tend to be better opportunities, different culture, different clients or sometimes the lawyer just needs a change of scene.  With the size of the US firm market in London, it is not surprising to see more of these moves, but to source effectively from this market,  being able to distinguish themselves from other firms will be important and working with recruiters that can convey the right message will be essential.

Whilst the US firms can source from other US firms, one recruiter also pointed out that they need to be aware that they may also start to lose some of their talent back to the MC. They were starting to see more US associates wanting to explore the opportunities that might exist for them at the magic circle.  The reduction in the pay differential has meant that any pay drop needed is more palatable and the bigger teams and opportunity to work with a wider array of partners is a key driver for some.

In-house lawyers

Often lawyers move inhouse to move away from private practice, so this is not a very common move to make, however the recent salary increases and press profile that has come with them has made many inhouse lawyers aware that if they moved back to private practice, they could significantly increase their pay.

US firms have made these sorts of hires at both associate and partner level across a range of practice areas.  In fact, over the last two years the elite US firms have hired over 10 inhouse lawyers as Partners.   

This move may become easier for inhouse lawyers at all levels in 2025.   However, they are a more difficult market for recruiters to source.  So, if you are a lawyer in-house looking to make this move especially in areas like funds and FS/Regulatory being proactive and contacting a good recruiter is probably better than waiting for one to call you.   

Scottish and Irish Markets

The Dublin and Edinburgh/Glasgow associate market is similar to Australia and New Zealand, in that it is already an important talent pool for the US and MC / International firms.   Clearly the distance of the move is significantly less so associates considerations and motivations maybe different to the Australia/New Zealand market and perhaps more akin to associates at silver circle/UK international firms.

As with the Silver circle/UK international market, if a lawyer from here sees joining a US firm as part of their desired career path, then the number of opportunities available may increase whilst the competition for roles may be less fierce.    However, if associates are considering all their options, then the US firms may not be able to rely on a higher salary getting them over the line.

US market

Finally, there are many US qualified lawyers in the London offices of US firms.  A lot join straight from law school in the US, but others also relocate from firm’s office in the US.  There are added benefits of moving people from one office to another, although it can be more expensive than hiring in the local market. 

If local market hiring becomes more difficult, US firms may look to tap into their own US associate base more; they could offer more secondments or relocations to the London offices. For lawyers in the US that are keen to make this move, their opportunities to do this might just get better in 2025. 

What should lawyers be looking out for in 2025?

It is unlikely that any impact would be immediate.  The recruitment market has been slow in the last year.   Corporate activity is often a good barometer for the market and several of the recruiters mentioned that many of the corporate lawyers in 2024 were only sporadically busy, meaning overall utilisation has been low.   With low utilisation levels, business cases for firms to replace a departing associate straight away are less immediate. 

If all departing lawyers are not being replaced, this slows down the number of roles in the market, this is evident from the number of corporate roles advertised on law firms’ websites over the last two years.   In July 2022 there were 68 corporate roles advertised by firms that advertised roles on their career sites, however in July 2024, there were only 20.  With less roles, there are less opportunities for those looking to move, which leads to a build-up of pent-up demand. 

In the last few months, the corporate market has improved, in the second half of the year the average number of new corporate roles being advertised by firms each month is double compared to the first half of the year.  At the beginning of December there were over 40 corporate roles being advertised on firms careers sites. Should confidence continue to return, then this may mean that the recruitment market, (especially in transactional areas) in the first few months of 2025 could start to get very busy again. 

As one recruiter pointed out though, with the existing pent-up demand, firms will find it much easier to fill roles, and any impact would not be noticed.  However, once the pent-up demand has worked through the system then we might start to see if there is any impact by the salary differential. 

The number of hires and where the elite US firms are hiring their associates from in the first 6 months should give an indication of whether there is an impact.  Experienced recruiters who have worked through different types of markets and are well connected will likely be more attuned to whether anything is changing - one of the reasons that talking to the right recruiter and not just any recruiter is important.

If you want to stay updated with our analysis of the London legal recruitment market, follow The Rackle on Linkedin, sign up to our newsletter and if you are a practising lawyer, you can become a member of The Rackle website for free.  

With thanks to the following expert legal recruiters Darryn Hale (Hale Search), Charlotte Taylor (O’Gorman Taylor), Jane Gaunt (Ardent Legal), Andre McClean (Strangford Search), Luke Mitchinson (ARMA Search) and Kathryn Parry (Kensington Parry).  Your expert knowledge, insight and understanding of the market is much appreciated.