New Year: threat or opportunity?
There’s lots of doom and gloom in the media around the number of insolvencies taking place (see for example this piece in The Independent with extensive quotes from experts at AlixPartners) and several pieces which talk about how real estate is faring.
In the legal sector, there tends to be a lag before the impact hits fully, but late 2023 saw a slowdown in M&A, a decline in both commercial and residential property, and an uplift in insolvency work.
Some firms (like Fladgate) which are disproportionately exposed to the real estate market have already asked their teams to work in a more flexible fashion – four days a week in some examples. (See the full story on that below.)
So is it all pessimism for law firms? My view is that no, it isn’t. Or rather, that it needn’t be.
In prior challenging economic cycles, what I have seen work well is:
- Larger firms which are willing to be flexible and lean into their relationships in order to keep work tend to win
- Smaller and regional firms who position themselves as at the appropriate value point tend to win – but this may mean going after new work for new clients in new locations if your existing work sources are less busy
- Mid-size firms who are brave around calling the market and cutting their cloth to fit also tend to win – maybe a well-timed campaign, maybe doing something clever with your human capital
The ones who struggle? Firms which put their hands over their ears, close their eyes and hope that their business will pass largely unaffected by market conditions.
That is not a strategy, it’s wishful thinking.
The importance of being earnest
Paraphrasing Oscar Wilde, “To be questioned by the police once, may be regarded as a misfortune; twice looks like carelessness.”
It emerges that Good Law Project founder Jolyon Maugham KC has been questioned by the police about a subsequently deleted series of Tweets during a murder trial, for which he has since apologised to the judge.
As described in this article by The Times, the Tweets were potentially in contempt of court. This isn’t the first time Jolyon Maugham has been vocal on Twitter resulting in a chat with the police: In 2019, he proudly announced that he had clubbed a fox to death, which was received with criticism at the time. In both Tweeting instances, the police decided to not pursue the matters any further having spoken to Maugham.
Reputationally, however, this is beginning to look a little troubling. Will there become a point where if this pattern continues, these incidents will detract from the values of the aptronymic project? A third time would almost certainly not be a charm.
New year, same pay war
It’s no revelation that US firms have been engaged in a long-time rigorous battle to compete for and secure the top legal talent in the market. This also doesn’t seem to be tiring anytime soon. An article from the Financial Times last week revealed that despite the decline in client demand, many firms including Milbank and Cravath, Swaine & Mooreended 2023 with a bang, having announced senior associates will receive pay rises and be handed out bonuses ranging from $15,000 (£11,861) and $115,000 (£118,611).
It seems firms headquartered this side of the Atlantic have also followed suit, with Magic Circle firm Freshfields Bruckhaus Deringer matching Cravath, Swaine and Moore’s salaries for the firm’s US lawyers. This move is likely to pave the way for other firms, as we saw with the domino effect from the similar move to increase junior lawyers’ salaries mentioned recently in this edition of Si’s Matters.
The question remains for regional and national firms: what are they willing to do in order to retain their best talent when the draw of EC postcodes remains so lucrative and US firms are poaching from major City firms? More innovation and clarity of messaging is going to be necessary in 2024.
In Other News
Off to a slow start for City firms
City law firms have felt the January blues, in the form of a deal-making slump, as described in a recent Telegraph article. Firms such as Fladgate and Slaughter and Mayhave taken measures to reduce the working week for their lawyers to avoid making redundancies.
The decision follows a deceleration in the commercial real estate market coming alongside higher borrowing costs and inflationary pressures. Initiating a trial period of reduced hours for reduced pay for some construction and property lawyers may be a wise move for other firms to make, as they ultimately grapple with the aforementioned factors.
Read more details about the initiative in the aforementioned article.
AI is on track for (legal) world domination…
… potentially,at least, for Allen & Overy, which has teamed up with Microsoft and legal AI start-up Harvey to launch ContractMatrix – a contract negotiation mechanism powered by Artificial Intelligence.
Allen & Overy is definitely on the front foot since its merger with Shearman & Sterling, and this endeavour is seemingly another front on which the mega firm intends gto take on the world. The firm predicts that this tool will attract business and enhance efficiency within the legal sector, with thousands of lawyers already utilising the software.
Will 2024 be the year AI infiltrates all realms of the law? I’d love to hear your thoughts on this new AI tool below.
Read more about the AI advancements.
Keeping it in the family
There was an article in The Independent this week explaining how two-fifths of UK business owners have parents who are founders. This got me thinking, as my dad too was an entrepreneur, and here I am today with my legal marketing firm, TBD Marketing.
Is this statistic different in the legal sector? Would most law firm founders have previously worked at major firms and then decided to set up on their own? Or maybe run their mum or dad’s old firm when ready?
I’m keen to hear what other founders and owners think about this stat, and perhaps share an anecdotal story about their own experiences. Drop me a comment below and we can have a chat.
Read the thought-provoking article in The Independent for more information.
The Other Side of the Law
As we enter election year, will something finally get done by politicians to resolve the state of the criminal legal system?
Having been wrongfully convicted in 2003, Andrew Malkinson is amongst those lobbying for urgent reforms of the justice system. Read more about Andrew Malkinson’s advocacy for reforms in this article.
Member of the House of Lords, Lord Blunkett has also highlighted the flaws in the Government’s plans to issue community service orders to low-level criminals, which he believeswill require comprehensive reforms of the criminal justice system in order to be proactive.
