Clifford Chance has raised pay for newly qualified UK-based lawyers to £125,000 in the latest escalation of a fierce pay war for junior lawyers in the City of London.

The group, which turned over £1.8bn in its most recently reported year to April 2021, has boosted base pay for its most junior lawyers by 16 per cent, making it the second “magic circle” law firm in two months to raise salaries for newly qualified lawyers. The news was first reported by The Lawyer magazine.

Freshfields Bruckhaus Deringer announced last month that it was boosting pay for newly qualified UK lawyers to £125,000 from £100,000. Linklaters and Allen & Overy each pay that group £107,500 a year, before bonuses.

The latest pay rises are part of a battle among elite City law firms to compete for talent with deep-pocketed US rivals, which has pushed salaries for some of the City’s most junior lawyers to well over £160,000.

Freshly qualified lawyers at Akin Gump Strauss Hauer & Feld in London now earn about £164,000 after a pay rise in March and a tweak to the firm’s conversion rate in April.

Davis Polk & Wardwell last month increased pay for newly qualified lawyers by 8.5 per cent to £160,000 in London.

The pay rises follow a blistering period of dealmaking last year which, combined with the fallout from the coronavirus pandemic, led to a white-collar skills shortage at top-end law firms.

Rising rates of attrition combined with higher demand for roles in busy areas such as corporate and private equity law resulted in fierce competition for mid-level hires.

Freddie Lawson, a recruiter at Fox Rodney, said that while the legal hiring market had “cooled slightly from the busiest ever conditions we had last year”, his company was “still extremely busy”.

He added that it would be “interesting to see” what impact the higher cost of salaries would have on the coming years’ financial results among law firms, many of which enjoyed record earnings last year but face a rising cost base.

Successive pay rises for the most junior lawyers have also caused tensions among their more senior colleagues in some cases, according to recruiters, in instances where more senior associates have not enjoyed the same increases.

Christopher Clark, director of legal recruiter Definitum Search, said: “As NQ pay keeps rising, it doesn’t go unnoticed by the mid-level associates whose compensation has stagnated at many firms and with US firms offering far higher salaries, it’s yet another catalyst for experienced associates to consider moving.” 

In an effort to keep hold of junior talent, UK-based law firms have offered extra bonuses to those working in the busiest areas. Freshfields, Allen & Overy and Clifford Chance all paid out special bonuses last year geared towards specific groups of lawyers, in a move away from systems where associates of the same rank are paid the same.

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