Freshfields has confirmed that it is in talks with Mills & Reeve and TLT with the aim of referring some of its work to the national firms.

The Magic Circle firm has referred work to a number of smaller outfits in the past, but it now aims to develop a formal relationship with Mills & Reeve and TLT, Legal Week reports. Tim Jones,London Managing Partner at Freshfields told RollOnFriday that he was planning for an upturn in deal flow, and that it made sense to build these relationships now. But the firm wanted to make sure it was using all its resources before it started using someone else's, and it was quite possible that no work would ultimately come of this.

With clients increasingly applying the thumbscrews on bills, firms are desperately trying to find ways to retain high end, high margin deals and outsource more commoditised work. Eversheds is using lawyers in South Africa, Lewis Silkin and Memery Crystal are outsourcing work to New Zealand, and firms across the City are using networks of alumni to do their more basic work at cheap rates.

Regional lawyers line up outside Freshfields' door

Using strong regional firms is an obvious move - with much lower cost bases, TLT and Mills & Reeve should be able to do a good job and still turn a decent profit. Expect other big City firms to follow suit - and in the long term, even to move to a slimmed down business model with fewer associates and reduced graduate recruitment.

David Pester, TLT's Managing Partner, told RollOnFriday that "we see real opportunity in law firms collaborating to deliver high quality legal services in a way that is as efficient, and therefore as cost-effective as possible".