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By Kevin Wheeler
On 13 November, I attended the annual RBS professional services conference. Each year Neil Parker, the bank’s market strategist, provides an overview of the state of the UK economy. For the last few years, this has been a pretty gloomy presentation, but this time he painted a much more optimistic prognosis, especially for professional services which he revealed was one of the country’s best performing sectors with growth currently running at 7%.
Now, having canvassed the views of a few of the delegates over coffee, I wasn’t the only one in the audience who was a bit sceptical about this claim. Few of us felt like the market was growing at anything like this pace. However, the following Friday we were proved wrong when a handful of law firms reported their growth figures for the first half of 2013/14 and these did indeed show that healthy growth has returned for some: Field Fisher Waterhouse posted a 7% rise, Clyde & Co 16.5%, Olswang 15% and Freshfields is predicting 3-4% growth. A source at Freshfields put their growth down to “strong M&A numbers and private equity work, which he said was back with a bang”.
That the growth in the UK economy seen since the beginning of the year is now flowing through to legal services off the back of increased M&A, more IPOs and greater corporate activity is great news. We’ve all known for some time that UK companies are sitting on around £74bn of cash reserves but have been nervous about investing because of the uncertain economic outlook. The increased confidence that we are now seeing among both businesses and consumers should lead to increased levels of investment which will drive further need for business advisory services including legal advice.
But any law firms thinking that the good old days are back and that they can return to the old business models that they used to operate prior to 2008 should think again. The world has changed and whilst the UK is again growing, many countries/regions, especially Europe, have yet to recover. Even in the UK, the level of Government borrowing is still very high and austerity conditions will continue to exist until these levels are brought down. Any lawyers or barristers dependent on state funded work are therefore likely to see continuing pressures on their fee income.
Even corporate law firms are in for a surprise as it is unlikely that the bargaining power exercised by in-house counsel over the last five years is likely to be given up easily. GCs have gotten used to driving hard deals with their external lawyers to get more for less – they are unlikely to slacken the reins now. This means that even the largest corporate law firms feeding at the top of the legal food chain will need to keep finding efficiencies, improving service levels and delivering better value for money.
Growth may be back but many of the challenges faced by the legal sector over the last few years remain.
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