With uncertain times ahead how are UK law firms innovating?
‘Law firms’ and ‘innovation’ aren’t commonly used in the same sentence. However, over the last 12 months we have noticed a number of law firms altering their business operations in order to maximise profits. Darryn Hale, Head of Private Practice and International teams at Taylor Root discusses the various methods some law firms are employing to alter the way in which they do business.
One trend we noticed at the beginning of 2016 is the increased amount of UK-based law firms ‘North-Shoring’ i.e. moving to cities north of London. Cities such as Manchester and Birmingham are becoming more attractive destinations for law firms due to their lower cost base operations. These areas are largely populated by paralegal level assistants who undertake the more commoditised aspects of transactions and cases.
A second trend we noticed is an increasing number of law firms employing interim / contract lawyers to assist during busy periods. This approach allows firms to resource increased workflow flexibility without the commitment and cost of permanent recruitment. It is interesting to note that some law firms are utilising their alumni who may not be in full-time employment.
In addition to the increased number of global law firm mergers that have occurred over the last several years, we have also seen a proliferation of new niche firms in the UK, particularly in the technology, employment and litigation sectors.
The UK legal market
According to the 2015 Marketline legal market report, the UK legal services market grew by 2.8% to reach a value of $49.6bn in 2015. This is predicted to increase by $11.7bn to $61.3bn by 2019. London has always been the dominant city traditionally driven by the large and sophisticated financial and professional services market. In the weeks prior to the UK’s EU referendum vote, activity within the London market slowed and it is still uncertain how the UK’s decision to leave the EU will affect the legal market in the long term. However, in the short term we anticipate a continued slowdown within real estate and corporate transactions. In the medium term leaving the EU will undoubtedly result in an increased amount of regulatory and advisory work.
One thing that certainly hasn’t changed in recent years is the competitive nature of the UK legal market. Law firms have become increasingly aggressive with their pricing structure in order to gain competitive advantage. The proliferation of new firms, e.g. regional firms entering the London market, will result in more firms competing for the same work.
The UK job market
It is too early to state with certainty how the Brexit vote might affect the appeal of London to foreign lawyers. Historically, the large international firms have hired high numbers of antipodeans. We are still seeing strong levels of interest in and from Australian and New Zealand qualified lawyers and we predict this will continue irrespective of the shape of the UK’s new relationship with Europe.
For the graduate market retention rates within the large London-based law firms is still high. Whilst we have noticed a slight reduction over the last few years it is still usual for a firm to retain around 90% of their trainee lawyers. Graduates working for UK law firms in London have seen salaries increase significantly year on year. This is driven by pressure to compete with the US firms operating in the same area. Starting salaries for newly qualified lawyers at top tier UK firms are now around £80,000.
So, what will the future of the UK legal market look like by the time the next general election takes place in 2020? In reality we can’t predict. However, the changes occurring will certainly make for an interesting few years, particularly with the increased competitive landscape, increasing salaries, not least to mention when the UK formally leaves the EU and has to create new rules for itself. We are potentially entering a new era for the legal industry.