How the legal market might (really) change over the next 3-5 years

8 May 2013

I recently attended the ICAEW solicitors’ group conference at Man City’s stadium in Manchester. Amongst the sky blue colour, there was a lot of talk about the shape of the legal profession and how this might change over theChris Howe next few years.

A table showed that of the 10,000 odd law firms over 4,000 are sole partnerships, nearly as many again are partnerships of 2-4 partners, and as you would guess the numbers then tail off rapidly. The question was then how this would change, given that dire predictions some 3-4 years ago don’t seem to have changed the table at all!

It seems to me what would be much more interesting would be to consider how the nature of the businesses changes, as I suspect that the table itself will be pretty much unchanged. People will always look to set up individually and in small groups to start out their businesses so as some firms disappear others will take their place. There is no doubt that the advent of ABS, the entry of high-street names, new rules on PI and legal aid will push many “traditional” firms to the wall.

However, there is the emergence of a new breed of “boutique” firms from litigation through employment and even corporate transactions. These operations, run by those who have left the big firms for a variety of reasons, offer top quality advice but with streamlined overheads, or with a completely different business model.

All of this says to me that while the proportion of firms of different sizes in the legal profession may or may not change, such analysis gives no indication of the accelerating pace of change that is engulfing most of the industry, and is set to continue.

Mark Jones, of Addleshaw Goddard’s Professional Practices Consultancy, showed the accelerating rate of merger activity at the top end of the Profession. No doubt this will continue and accelerate further. However, he made a telling point that merger is not a strategy, merely an execution vehicle.

Firms grappling with the current environment need to be clear:

  • It isn’t going to get any easier anytime soon;

  • They must have a plan to deal with the situation they find themselves in;

  • That merger may or may not be a means of reaching their goal, but merger cannot be the goal;

  • Merger will not substitute for work needed to get the business in the right financial shape – indeed that work is probably a pre-requisite for merger

Chris Howe is a director at Raedbora Consulting Ltd.