More than one in 10 City lawyers are now working in-house as law firms face an increasing squeeze from the commercial sector, according to research by a recruitment consultancy.

Between 2000 and 2010, the number of solicitors in commercial organisations and financial institutions rose by 140%, with a rise of nearly 8% in 2010 alone.

There are now estimated to be around 12,500 lawyers working within commerce and industry, compared with around 11,500 in 2009.

The figures, part of the Edwards Gibson in-house lawyers summary for 2011, found the size and complexity of in-house legal departments have grown substantially, even if salaries for in-house lawyers continue to lag behind those of their peers in law firms.

Their growth will be another reminder to established law firms that commercial sector companies are increasingly likely to shop around to keep costs down.

Tony Williams, founder of consultancy Jomati and former managing partner at Magic Circle firm Clifford Chance, said he was not surprised at the rise of in-house lawyer numbers.

He predicted that most work may only be allocated to firms on the basis of price.

‘Legal departments are considering every aspect of the work they do,’ he said.

‘Where they have sufficient volume they are bringing work in-house as it can be considerably cheaper.

‘Inevitably the effect of this approach may place a squeeze on commercial firms.

'To avoid this firms need a clear value proposition which meets the client’s needs to accurately manage and predict legal spend.’