This year's increase in competitive pressure from the previous year is sustaining a trend seen across the 26 years we have been running this survey. However, could this year’s lower figure mark the start of a trend? As noted in our most recent analysis of filed accounts for the top 50 UK law firms, strong revenue and profit growth continued across the sector so perhaps pressures are easing?
However, it is clear that while firms continue, in the most part, to perform well, with revenue and profit growth in the legal sector materially above inflation for a number of years, generating these returns appears to be getting harder. The second most common source of competition for London firms is now international firms. These are primarily US firms, who dominate the top spots in recent ‘most chargeable hours expected’ tables. Could it be that expectations for fee earners are going up as a drive for more efficiency. Or is this any different to the high pressure environment to which lawyers have become accustomed?
Recessions tend to create additional competitive pressures, but this time it is slightly different. With the relative success of the work–from-home set up and attractiveness of out-of-London locations from a lifestyle point of view, those competitive pressures may also be impacted by a shift in available resources. Are we on the cusp of a mass exodus away from London as preferences shift and lawyers seek out a better work-life balance?
Law firms will also need to consider the other competitive pressure – the ‘in house’ legal team. Many companies have sought to bolster in-house legal teams rather than incur external legal costs. A number of fee earners have jumped ship to in-house legal services with the aim of regaining some of their work-life balance. Could this also become a much more significant competitor?
Firms continue to be optimistic about the future, but they will need to be wary of where their competition is coming from and how the expectations of the next generation are changing.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.