The announcements that Clifford Chance and Linklaters were to make redundancies across their organisations in the wake of the credit crunch sent shockwaves across the legal world. An era was clearly over.

Linklaters in particular stood out because the news (which did not specify how many partners were leaving) appeared to make a virtue of the redundancy exercise — not least because it took on a positive tone of looking forward to a new world that lay over the horizon. Up to 120 lawyers face redundancy.

But the zeitgeist demands recriminations, guilt by association and grovelling apologies. And it is perhaps inevitable that lawyers and other staff facing redundancy will be feeling bitter and let down by their managements. After all, this was not how they had seen their careers working out.

Stirred by the controversy, Simon Davies, the managing partner of Linklaters, spoke exclusively to The Times about what had been happening in his firm and the City in recent years. He also voiced some home truths about the legal sector and its future.

“The law is a service industry so if there is a decline in economic activity there is inevitably going to be a contraction in demand for lawyers’ services,” he says. “Fortunately, Linklaters is a broad-based firm — that’s a key part of our strategy — so we are seeing an increase in work in areas such as insolvency and corporate recovery. But that cannot possibly compensate for the decline in work in mergers and acquisitions and financial products. And, it must be said, because of the changes brought about by the developments of the past year or so, much of that work will never come back — or at least not in the foreseeable future.”

It is this that provided the cornerstone for Linklaters’ statements about the future. Davies talks about “right-sizing” the firm for the new economic realities that lie ahead and he sees no reason to be apologetic about that. Moreover, he has no reservations about the way that the firm expanded and flourished over the past five years of boom. “There was a big demand for the specialist kind of legal skills we could offer, especially to the financial sector. So we expanded to meet that need. And where we opened new offices across the globe it was always because our clients were there and wanted us to be with them. We were never on a mission for growth or size for its own sake. We were the right size for the work that came to us.”

Other firms, though, Davies believes, were less balanced in the way that they expanded. Some big American firms in particular jacked up the gearing — that is the ratio between the number of partners and non-partners — and focused on a narrow range of legal products. The profitability may have been enhanced in the short term, but the sustainability was questionable. “It’s these self-same firms that had high gearing — by which I mean one partner to seven or eight other lawyers — that are the ones that have faced real difficulty.”

Instead, Davies sees a very different model emerging for the future. “I think that there is going to be a real step change,” he says. “We are already seeing more contacts between our partners and clients at board level because of the complexity and uncertainty of the issues they are facing. Partners are spending much more time executing transactions or giving advice and, in each case, working with smaller number of lawyers to ensure that quality is maintained. It’s important that we focus on the value we bring to a client.”

So partners are going to become much more hands-on, spending rather less time on the marketing and general oversight and more time on delivering excellent service. In this context it is inevitable that the firm should prioritise the very high-value work that needs the most experienced and creative skills while starting to slew off the lower value work that could be undertaken by more junior staff.

Besides, there is a clear move for clients increasingly to take back in-house the lower-level work. A survey recently undertaken by Laurence Simons, the international legal recruitment specialists, and Rees Morrison Associates, the law department management consultancy, found that the UK is one of the busiest countries in Europe for the recruitment of in-house lawyers. In short, unless they absolutely have to, the clients will now prefer to do legal work themselves.

Of course, the alternative to the Linklaters approach is the much publicised Norton Rose philosophy — to avoid redundancies and put people on short-term working instead. This has drawn much admiration and is clearly well intentioned. The problem could be that it is based on the premise that the good times will return.

Davies thinks there are good times ahead — but on a very different basis. “We have developed a global platform and that is the right approach. We are now focusing on building for the long term with a combination of sector, practice and geographical strengths. We are now moving to the right size for the new realities in the legal marketplace.”

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