Posted on Friday 16 September 2011 by Ulster Business
Among the glut of jobs announcements Invest NI made in the second half of last year before EU state aid regulations changed was news that two internationally renowned law firms were coming to Belfast.
Allen & Overy and Herbert Smith, large London firms with global reach, were confirmed as significant investors – A&O unveiling plans for a legal services centre and Herbert Smith a global dispute resolution centre.
Jeremy Fitch, Invest NI’s managing director in charge of client relationships told Ulster Business the strategy of attracting legal services firms to Northern Ireland is a natural progression from work it has done over the last decade to attract shared services projects in IT and finance.
Invest NI is targeting firms looking for a near shore solution, cultural compatibility and a location that is cost competitive. Knowing Northern Ireland struggles to compete on a corporate tax basis at present, a strong emphasis is being placed on the educated workforce.
“We try to identify what companies have blocks of work that can be established as a cost centre as opposed to a profit centre, that are looking for skills in an area where we have a good supply, and where the type of work tends to be focused on a near shore solution where we have a cost advantage against the rest of Western Europe. Our costs are about 50 per cent lower than London, 30 per cent lower than Dublin.”
The first shared services centres established here by Prudential, Abbey National, National Australia Bank and Halifax, helped Invest NI sell Northern Ireland to US firms Allstate and Liberty, and their testimony was in turn used to attract the likes of CITI and New York Stock Exchange. Fitch highlights CITI’s decision to follow up its initial IT-based success here by bringing a legal and compliance team to Belfast as a major factor in the agency identifying legal services as the next rich seam of opportunity.
“What convinced them was they saw we have 755 graduates coming out every year. In my understanding there are only spaces for about 150 of them to become solicitors or barristers. The point is there is a massive oversupply here. CITI were the first ones in discussions with us to tap into that,” he said.
By the fourth quarter of this year CITI’s legal and compliance division will employ 85 people in Belfast in activities including contract negotiation, legal control, trading support services, compliance monitoring and research.
The company’s Managing Director and General Counsel in Belfast, Anna Moss, says the division is a key strand of the important role CITI’s still expanding technology and operations hub plays in supporting the bank’s businesses across Europe, the Middle East and Africa.
Ms Moss confirms the talent pool in Northern Ireland did prove “very attractive” and believes that CITI’s presence adds an “additional opportunity” for law graduates who may prefer to work for a global entity rather than go into private practice.
“The Legal and Compliance Department provides coverage for a range of businesses including our global transaction services, front office origination and markets trading businesses across EMEA. So we are very much an integral part and partner with our London hub, we just work remotely,” she explains.
“Belfast’s location is an important factor, particularly in the legal function. We can have people in London and London can have people here very easily.”
Ms Moss met with Herbert Smith and Allen & Overy to tell them about Citi’s experience in Northern Ireland: “I think it is a very important part of our footprint here and our position in the community that we take an active role in helping to continue the build of a financial services industry here. So, on that basis, and because of our strong relationship with Invest NI, I was more than happy to talk to the law firms and tell them why Belfast was the right location for us.”
Herbert Smith opened its Belfast office in the Gasworks in April 2011 after also being attracted by the pool of high quality graduates and professionals, as well as the lower cost base, relative to London.
Its office is focused on large-scale document-intensive aspects of litigation, arbitration and regulatory investigations, and will work for the firm’s clients around the world.
Around 30 staff are already in place, 23 of which are fee earners – a mixture of qualified lawyers and legal assistants. The majority are from Northern Ireland, some of whom trained in England and have now returned home.
In June, Herbert Smith announced that a further 12 fee earners would join in coming months, and said it expects to create another 49 high quality jobs over the next five years, depending on market demand.
“It is entirely a fee earning office,” director of the Belfast office Libby Jackson told Ulster Business. “We are roughly 50/50 qualified lawyers to legal assistants. The speed of growth will depend on the business needs and happen in response to the market demand. But I think it is important to stress that we are not competing with local firms for work.”
Document intensive legal work has become increasingly important over the past decade as regulatory and technology changes have informed the dispute process, and Herbert Smith found clients were looking to see how it priced this kind of work to distinguish itself from its competition.
“There are Legal Process Outsourcing operations which do this but we decided we would prefer to do that part of the work ourselves. We concluded there was a need for an integrated service that was part of Herbert Smith, but at the same time cost effective for our clients. The integration of our offering, at such a competitive cost, adds real value for clients – Belfast works as one team with London or internationally,” explains Ms Jackson.
Herbert Smith aimed to put together a team of people eager to take on intellectually challenging international work, and Ms Jackson said she has been pleased by the ability and enthusiasm shown by the people recruited so far. She has, however, identified one area where the local skills base could use improvement.
“The one thing I would like to have seen more of is language skills – not just French and Spanish, although they obviously are welcome. Top of the list would be Mandarin, Russian, Japanese and Arabic and that is something we’ve raised with Invest NI,” she said. “I wanted to pull together a patchwork of different language speakers but we’ve not found that so far.”
Allen & Overy started to investigate establishing a shared services centre as part of a wider review of its support functions.
It engaged Buck Consultants International to ensure it got an objective view of potential locations based on criteria such as quality, cost and risk. From an initial list of 20, Belfast was one of seven places A&O sent a team to visit for a detailed due diligence study – which resulted in the city making a short list of three alongside Budapest and Cairo.
“Cost wasn’t a deciding factor because a lot of places are cheaper than Belfast. A&O were driven by quality rather than cost,” says A&O’s service centre head Andrew Brammer.
The Legal Services Centre will support legal teams in the firm’s other offices, delivering HR, document production, IT, marketing, finance and business services to Allen & Overy.
INI offered £2.5m to a project that will bring £6m in salaries into the local economy every year. Whilst the financial incentive was important, Brammer says the main driver was the quality of the people, the high volume of quality graduates from the two universities and the common law system with the UK.
“In the context of an overall £11m investment and what the shared services centre will save us over the next ten years, (the financial incentive) is a factor, but we came to Belfast on its merits and we expect it will provide us a good return on investment,” he said.
A&O is planning to start with around 20 law graduates/professionals in its Legal Services Centre in the coming months and an overall headcount of around 60 is expected. The firm has committed to creating 317 jobs over five years and has space planned for staff levels of just over 400 in the new offices it will shortly occupy in 68 Donegal Quay. Some 190 employees will be in place by April next year.
Mr Brammer too is keen to point out that his firm is not in Belfast to compete with the Northern Ireland legal market and also highlights that reports existing employees in London would fill most of the new positions created – for which Invest NI effectively offered the firm £8,000 each – were erroneous.
“In the end we have four staff coming over and, in this recruitment phase, over 130 who are not. All the other people are from here or are using it as an opportunity to return to Northern Ireland,” he explained.
The company received an overwhelming 4,100 applications from good quality applicants for the 130 jobs it has advertised so far, which Brammer describes as a “phenomenal response”.With a pick up in the IT market over the last nine months however, there are some positions where it has taken more work to get the right quality of people. A&O plans to work with local recruitment agencies, QUB, UU, Belfast Met and Invest NI to ensure the pipeline is strong.
Invest NI’s Jeremy Fitch acknowledges A&O’s concerns, and says the agency will work with the Department of Employment and Learning, universities, colleges and schools to point more people down the IT career path, but notes there have been doubts about Northern Ireland’s ability to fill niche roles in the sector before.”Companies have often said it is tight but I would say we need to pay special attention to this issue at the moment. But I take confidence in the fact that First Derivatives, CITI and NYSE were all recently prepared to push ahead with expansion plans knowing what the market was like here,” he adds. “We absolutely have to work with them to find people to fill those spots, because what we don’t want is to get into a wage inflation scenario that makes us uncompetitive. It is a hard balance.”
While Fitch understandably won’t name companies the agency is tracking it has made no secret it is targeting more magic circle law firms, and large financial institutions that have a legal requirement. He believes the sector will be a key strand in rebalancing the economy and bringing higher quality jobs to Northern Ireland.
“The area of legal services has a lot more to offer,” he said. “The fact that A&O and Herbert Smith got such great response to their job adverts demonstrates there is demand. We would love to get a couple more and the fact that we’ve got Herbert Smith and CITI and A&O, which are all big brands, has certainly given us a big boost.”