How have law firms coped with the change in economic times
and the introduction of new legislation set to completely restructure the legal
field? I will give an overview of some of the steps law firms have taken in
order to deal with these then I will go on to highlight some of the changes I
see having an impact in the early stages of my legal career.
One of the biggest methods of combating the recent climate
and regulatory changes has been mergers. It is heavily evident UK wide. Last
year saw a huge increase in mergers with at least a quarter of all law firms in
the UK top 100 merged with another law firm. In comparison, there were 21 law
firm mergers in 2011 involving firms in the top 100.
Catalysts for these mergers I would say has been a search
for growth driving law firms to enter new markets along with sustaining markets
in areas that are set to be in great competition with the likes of Alternative
Business Structures. It may be a bid to create a big name, maybe even a brand
name that can then cope with the likes of the Co-operative. This merging activity
is expected to continue as predicted by Tony Williams:
“We expect this trend
to continue in 2013 because the strategic logic behind such deals is only
growing stronger.” Tony Williams, the former managing partner of
Clifford Chance
The logic in which he refers may be attributed to the law
firms that were originally pessimistic of ABSs, however, upon seeing huge firms
merge, have had a change of heart and feel the need to merge in order to
sustain providing legal services in such a competitive market.
Some of the mergers that have taken place recently involving
Scottish firms include Burness and Paul and Williamsons, DWF and Biggart
Baillie, Ledingham Chalmers and Esslemont Cameson and Gauld and McGrigors and
Pinsent Masons.
However, mergers have repercussions. Pincent Masons
confirmed in June 2012 it was consulting with 40 support staff in a bid to
eradicate duplicated roles as a result of its merger with McGrigors.
This leads me on to the second step that law firms have used
in order to deal with the climate and change: redundancies. The reason for
these recent job cuts in law firms is that the firms have too many lawyers and
staff in practice areas that, because of the economic climate and the changing
legal serviced market are not making money like they used to.
It will always be difficult to gauge just how many people
were made redundant in the last few years. According to figures in The Lawyer,
redundancies were expected to have hit more than 2500 at UK law firms in 2009.
This led to two risk categories: underperformers and those in
a practice where the demand has evaporated somewhat. The former category will
or maybe even has had an interesting impact on recruitment within law firms.
There is a new level of excellence that has to be satisfied in order to in
order to obtain employment security. Previously, “Underperformance
was hidden by a bull market where everybody was busy...” - Tony Williams
This may be a good thing as it ensures that our clients are being provided with
an even higher standard of services and the high performers are finally being
recognised for their hard efforts and being awarded security.
However, the statistics for these redundancies are pretty
scary for not only the up and coming lawyer but also lawyers in practice today.
The redundancies in varying numbers can be seen in many well
known law firms:
Maclay, Murray and Spens confirmed in June 2012 that it was
making two lawyers and four support staff redundant in its Glasgow Private
Client team alone so it could focus on services more closely aligned to client
needs.
With a similar mentality, Dundas and Wilson axed 30 staff
after reviewing the “nature and level of demand for its services” in April
2012.
With less staff in employment in each of these firms, there
has been less need to keep certain offices open for those firms with more than
one office. This brings me to my third step which is the closing of offices and
along with that the closing or consolidating of practice areas within law
firms
.
The most recent and prominent example of this is DLA Piper’s
office closure in Glasgow where it had 10 partners, 25 fee earners and 50
support staff. Along with that, 10 jobs in the document production unit in
Edinburgh faced redundancy.
In terms of consolidation, DLA Piper has also been no
stranger to this. Their entire document production team of 116 people across
eight offices is being consolidated into one centre in Leeds with only a small presence being kept in each office. Also, DLA are
selling its defendant insurance practice, which has 31
lawyers and 19 support staff. Should that fail, it will close the practice.
With redundancies being made left, right and centre and
offices being closed down, the effect has extended to trainee intake across the
UK.
The Law Society of Scotland statistics provide little
optimism in this regard.
“It’s hard to say exactly how things would happen, given this
would be new territory, but it’s likely
the timescale from a “Yes” vote to full independence would be lengthy,
given the huge number of issues which would need to be resolved” –
15 October 2012.
Secondly, access to justice in criminal summary proceedings
is very much under threat with the recent legal aid cuts. The Scottish Civil
Justice Council and Criminal Legal Assistance Bill seeks to introduce legal aid
contributions towards legal expenses to be made by accused persons and that the
responsibility for collecting these contributions will lie with individual
firms of solicitors. Concerns lie with the failure rate currently of clients
paying law firms being 80% in England. The Scottish government estimates 30% of
defendants will fail to pay on time. This will leave criminal practice work
even more unprofitable than it already is leading to many firms going out of
business or refusing to do legal aid work altogether. There is also a concern
that the cuts may spread to civil legal aid.
Lastly, in Scotland, we will finally feel the impact of
Alternative Business Structures after only hearing of it in England and Wales.
It will see a creation of a lot of jobs with the Co Operative revealing that it
will be hiring 3000 solicitors to carry out its numerous legal services. That
is an enormous amount that will easily out compete the majority of high street
firms. You can see the scale of it in comparison to some of the biggest law
firms in the UK. DLA Piper, has a lawyer base of 4200. Linklaters has only
2300. Law firms have reacted in different ways to this new structure. The likes
of Irwin Mitchell were the first to apply to be an ABS but Freshfields and
Slaughter and May amongst others have ruled out the possibility. So in the
coming years, it will be interesting to see how it will impact the Scottish
firms, the mergers, and the UK wide firms that had originally said no to the
conversion.
Other changes set to make an impact include the closing of
sheriff courts this year which will undoubtedly see a rise in the number of
cases dealt within the remaining sheriff courts and how this will affect the
efficiency of the court system; also the Law Society of Scotland has announced
that all trainees only need to be paid the national minimum wage instead of the
recommended rates – it is yet to be seen if law firms are inclined to pay the
minimum wage in order to deal with the economic climate and if it will
encourage more firms to take on trainees. (which
from 1 June 2012 will be £16,200 (up from £15,965) for the first year and
£19,400 (up from £19,107) for the second year) and lastly funding for the
diploma has attracted much criticism for their current system of a £3,400 loan from
SAAS as it has been argued it does not provide a fair access to the Scottish
legal profession. However, I spoke to a partner of a firm at the TANQ Society
Christmas Social who used to be on the board for allocating the 300 funded
places and he said that he rather it was the way it was now as everyone has the
same level of access if they so wish.
It’s not going to get any easier in the legal field so it’s
time to embrace the change or at the very least be prepared for it.
