Market confidence is higher than pre‐pandemic levels with 0% of respondents being confident in their firm’s future.
PII has increased by an average of 0% amongst SME firms.
0% of respondents said the cost of PII was among the biggest threats to their firm.
0% agree that Covid‐19 has presented an opportunity to drive innovation and change in working practices.
Our 2020 report looked at how small and SME firms were impacted in the immediate aftermath of the UK lockdown as the coronavirus pandemic hit the country. It found the industry remained robust in the face of uncertainty, but some firms struggled more so than others.
A year later, the pandemic still looms over the industry. As restrictions have eased across the country, we look back on how firms fared.
While firms appear to have once again weathered the storm, showing strong financial performance and confidence in the future, they face new threats to their business, such as an increase in professional indemnity insurance (PII) premiums, adapting to new ways of working, and keeping workers happy after a difficult year.
As the industry looks to move on from the pandemic, there is also uncertainty around working practices and how to drive innovation in a traditional industry.
Financial Performance — Survive or thrive?
Most firms have seen revenues and profits hold strong through the pandemic. As such, lawyers are confident about the future of their firms and most expect to grow without the need for merging or acquiring firms.
Around three quarters of responding firms said their revenues and profits were level with or higher than their projections for 2020‐21. Despite national restrictions and market uncertainty, 31% of firms were able to outperform their revenue expectations.
Professional indemnity insurance has fast become the top threat for law firms thanks to rising premiums. At the same time, firms must find new ways of bringing in business and keeping staff happy to address talent retention risks.
Firms’ operational costs are still dominated by salaries and were bumped up by buying new tech for remote working. However, professional indemnity insurance (PII) is now firmly on their radar. Beyond the increasing costs, lawyers also found the process behind PII time consuming and overly complicated.
Cost of Free Information
Firms’ PII costs may be higher if lawyers use the open web for information, as lawyers are at a greater risk of using inaccurate or misleading information. Despite this, Google was the most-used source for research and guidance information.
Most lawyers were unsurprised that free resources were more popular than subscription-based online libraries. However, all firms stressed the necessity of these tools when gathering accurate and relevant information. 46% of respondents said it is risky to use the open web to search for real answers and only 5% completely trust the accuracy of free legal information found on the internet.
Another threat listed by firms was generating new business. To respond to this, firms are taking on a digital‐first strategy to draw in clients. Responding lawyers said they will be investing in website development, social media, and marketing. 65% of firms have or will implement website development and 59% have or plan to develop a social media strategy to attract customers.
With staff already stretched thin, some firms are looking to bring in outside talent to help them online. 26% of firms plan to hire, or have already hired, more staff to focus on marketing or business development.
Working From Where?
Lawyers expect to return to offices, but many are split on how many days they’ll be there. The most popular option was returning to the office full time, but a majority expect the future of work to be (at least in part) at home. This is in line with wider research from Aviva that showed 7 in 10 UK workers want hybrid working to stay.
Balancing these expectations is no easy feat, especially in a traditional industry such as law. 63% of respondents listed keeping working practices and systems up to date as a significant threat to their business.
Business leaders are aware of the benefits of having staff meet in person, especially for new joiners or younger workers. This perhaps explains why the vast majority of firms (71%) won’t be changing their office size, with only a handful going fully virtual.
Current performance vs. 3-4 years ago
Don’t know/ prefer not to say
Confidence looking forward
Not at all
5 year practice plan
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