Inflation and Its Impact on In-House Legal Salaries

The Economic Backdrop: Inflation and Stagflation

In 2022, the UK faced an unprecedented economic situation driven largely by global events, including the war in Ukraine. Inflation surged, creating a scenario not seen since the late 1970s stagflation, where rising interest rates and inflation erode take-home pay.

• Food Inflation: Reached 19.1% in early 2023, the fastest in 40 years.
• Energy Costs: Businesses raised prices to offset soaring costs, prompting wage demands and further price hikes.

Impact on In-House Legal Salaries

Inflation has led to:

• Higher Salary Demands: In-house lawyers sought pay rises to cope with the cost of living.
• Budget Pressures: Companies broke budgets to secure top talent.
• One-Off Payments: Many employers offered additional pay to retain staff.

However, the market has shifted in recent months:

• Redundancies: Leading City firms have cut roles in corporate departments.
• Interim Lawyers: Increased availability of interim professionals with fewer permanent roles.
• Salary Stabilisation: Overinflated salaries are no longer the norm.

Current Market Trends

• Hybrid Working: Banks and asset managers now require 3–4 days in the office.
• Buyer’s Market Emerging: Greater availability of corporate and commercial lawyers.
• Specialist Skills Still in Demand: Niche expertise continues to command premium packages.

Key Takeaways for Employers and Lawyers

• Salary expectations must align with market realities.
• Remote and hybrid flexibility remains a key factor in attracting talent.
• Despite economic challenges, top talent with specialist skills can still negotiate competitive packages.

Looking for guidance on in-house legal recruitment or salary trends? Contact Chadwick Nott for expert advice and access to top legal opportunities.