Adapting to disruption in the legal landscape

Despite increasing numbers, lawyers in the UK face uncertain times as legal aid and fees are squeezed, and alternative firms owned by non-lawyers provide competition

Never has there been a starker contrast between the “haves” and the “have-nots” in the legal profession than over the last year.

On the one hand, public law practitioners felt so frustrated at the scale of government cuts to legal aid eligibility and fees that they manned the braziers in strike action. On the other, parliament’s public accounts watchdog expressed indignant outrage that at least one of the City of London’s elite “magic circle” law firms was billing out its partners at £1,000 an hour when working for the government.

The irony that taxpayers have to fork out in both instances has not been lost on some. Yet despite these grumbles, on the surface the UK legal profession seems to be in rude health.

Profession on the rise

The number of practising solicitors in England and Wales – the biggest branch of the legal profession in the UK’s biggest jurisdiction – continues to grow at a pace that would make a mother elephant proud.

Students still want to be lawyers, the market is still growing and top-flight commercial lawyers are bringing home the bacon for UK plc

According to the profession’s regulator, at December 2009, in the aftermath of the global financial crisis, there were nearly 112,600 practising solicitors and as of April this year that figure had rocketed to nearly 135,000 – an increase of about 20 per cent.

The Bar is also growing, albeit, far more sedately. In 2010 there were 14,900 practising barristers and four years later (the most recent figure available), there were slightly more than 15,700.

Of that group of 150,000 lawyers, it is the commercial practitioners in and around the City of London who are the most struttingly confident, casting themselves as a significant national asset. The 2015 Legal Services report from TheCityUK, a lobbying group promoting businesses in the Square Mile, claimed the contribution of large law firms to the UK economy is growing at more than 9 per cent annually. The most recent figure is a contribution of £22.6 billion, equating to 1.6 per cent of the country’s gross domestic product.

The evidence is clear, then – students still want to be lawyers, the market is still growing and top-flight commercial lawyers are bringing home the bacon for UK plc.

Increasing disruption

But for how much longer? Is the legal profession a bubble in search of a pin prick?

The problems on the high street are arguably easier to identify. General practice law firms are being buffeted by ever-shrinking legal aid eligibility and tightening fee rates, as well as reforms to personal injury claims, and encroachment by so-called market disrupters in the form of high-volume alternative business structures owned by non-lawyers.

But those “masters of the universe” in the City are hardly exempt from the tides of change. Outsourcing – whether to offshore providers in India, South Africa or the Philippines, or nearshore in Manchester, Glasgow and Belfast – is already hitting them.

Next, argue many, will come automation in the shape of artificial intelligence. In ten years’ time, runs the argument, one robot lawyer will handle the grinding job of document review that formally required ten young human associates. And the robot won’t go for constant tea breaks, waste time on social media or have anything resembling partnership aspirations.

And then there are the accountants. Three of the global big four – PwC, EY and KPMG – have been granted alternative business structure licences, which means that in England and Wales they are law firms. PwC and EY have launched significant recruitment drives in London, poaching lawyers from traditional Square Mile law firms.

And even if you believe the public statements from the accountancy practices – that they are not targeting the clients of the top-ten City law firms – they will at least eat into the profit margins of the mid-tier solicitor players. Mass consolidation in that market has been forecast before; now it looks inevitable.

Focus on specialisation

So will it all burst with a loud bang for the UK’s legal profession? “It is clear that the world – and the markets that we operate in – is changing rapidly,” acknowledges Gideon Moore, the lawyer elected last November to take over the managing partner role at Linklaters, one of London’s five magic circle law firms.

“Firms need to be brave and embrace change, looking for the many opportunities it presents rather than the threats it poses,” he adds, flirting with the jargon trap that snares so many in the City. But then he gives a clear nod to the importance of evolving structures, if not an outright welcome to the robots. “Firms need to keep close to their clients,” says Mr Moore, “establishing long-term relationships, and delivering their service effectively and efficiently.”

James Burns, senior partner at Clyde & Co, a fellow City law firm, expands on this theme, narrowing down success to ever-greater moves towards specialisation.

“The days when a firm could afford to be all things to all people are long gone,” Mr Burns says. “If you are going to succeed, you need to be clear on who your clients are, what they need from you and how you can best deliver those solutions. Those answers are never static so you need to be nimble too. Our experience is that one way to do that is to focus on a handful of sectors in which we can truly live and breathe our client’s business.”

Also found in Change management Law