The Legal Sector Bounce Back After Covid (and What it Means for Your Law Firm)
- June 29, 2020
Despite the recent upheaval, the UK legal sector is faring well in comparison to the economy as a whole.
The Office for National Statistics (ONS) reported that revenue in the sector only fell by 4.7% from March to April, compared with the 20% the rest of the economy has suffered.
This is welcome news in a period which has been hounded by a degree of anxiety and uncertainty.
This ‘surprisingly positive’ news indicates that UK law firms will not have to fully employ temporary working measures to the degree that was predicted during the worst of the lockdown. Many firms are managing better than they expected, and they are now bringing staff back from furlough and redundancies have not been needed.
We still have a while to go before the full extent of the impact of Covid-19 is realised, but these figures are representative of a tentative optimism emerging in some industries, including the legal sector.
There will, of course, be some changes to the way law firms operate in the UK, which will impact teams, revenue, and entire organisations. But where there are losers, there must also be winners – today we look at where the challenges and opportunities are starting to emerge in our sector.
Despite most specialisms coping well with the recent upheaval, the most affected area is property law. The unprecedented ban on house moves which was in place during the lockdown slowed this specialism to an almost standstill.
But the pandemic didn’t stop people from wanting to move house – those customers still exist. It is about finding a way to help these individuals, to keep in contact with prospective buyers about where they are with deposits, mortgages and selling their current homes.
Likewise, the government imposed restrictions on evictions due to missed rent payments due to Covid-19, but this protection for tenants ends in September. From then, we can expect to see an increase in all aspects of property law, especially surrounding evictions and tenancy disputes. The unfortunate consequences of Covid-19 are yet to be realised for many individuals who will sadly have to make alternative living arrangements, both renters and homeowners will feel the impact as the year progresses.
The commercial property sector is also in a state of uncertainty, with months of closed shops, retailers are struggling to pay rents for the quarter. One estimate suggests that only around 15 per cent of retailers are in a position to pay commercial landlords after almost three months with no income.
And this problem is not confined to smaller businesses. Retail giant Intu, who owns the Trafford Centre, have warned they might have to close malls if they cannot reach an agreement with lenders.
As the commercial rent situation threatens to become a problem, the British Property Federation has advised any businesses unable to pay their quarterly rent to speak to their landlord as soon as possible.
Similar to residential property, the next few months are going to be pivotal for commercial property contracts, with the closure of businesses, evictions and sales a distinct possibility. After the current ‘dry period’, in the next few months we will see a significant increase in the need for commercial property legal services.
Merger and Acquisition
One area which has seen an increase which we can expect to continue is in merger and acquisition.
Global law firm White & Case recently published results of their M&A survey, which found that 86 per cent of firms expect an increase in this area. The findings revealed that 50 per cent of dealmakers said they plan to ‘lean in’ to any downturn.
Traditional bankruptcy, restructuring, and cases relating to sovereign debt are expected to rise in the coming months.
How the Industry is Bouncing Back
The ONS figures I mentioned earlier, while not representative of every UK law firm, indicate a promising future ahead.
The unexpected positive figures mean that many law firms can bring employees back from furlough earlier than expected, and will reduce the fear of redundancy worries.
Because of the speed with which the pandemic hit, there was initial concern over reductions across all legal specialisms, potentially resulting in many redundancies.
But the legal sector’s worst fears appear not to have materialised. Our industry has already fared well, and a recent Reuters poll found that a quick recovery of the economy as a whole can also be expected, lessening redundancy fears even further.
Law firms who have maintained excellent customer service and market awareness, and practising adaptability, are the ones who will come out of this crisis stronger.
Rob Millard, of Cambridge Strategy Group, said that firms must look forward to next year in their planning –
“Concessions such as VAT and partner tax deferrals are helping short term cash flow, but those will end in Q1 2021,” he said. “The need to look longer term and pivot to digital delivery of those services, or finding other value propositions to offer to clients, has never been more acute.”
Planning for the future is easy when you have a dynamic legal team who share the same goal and understand each other and the needs of the business inherently.
If you need to recruit individuals into your legal team who will strengthen your business to prepare for what the rest of the year, and beyond, will bring, we can help.
Get in touch with us today on 01772 259 121 or contact us here to find out about how we can help find you find the talent you need to succeed.
About Clayton Legal
Clayton Legal has been partnering with law firms across the country since 1999 and during that time has built up an enviable reputation for trust and reliability. We have made over 5,000 placements from partners to legal executives, solicitors to paralegals and legal IT personnel to practice managers.
If you are building your legal team or looking for your next career move, we can help. Call us on 01772 259 121 or email us here.