Reports of the death of the premium deal lawyer have been greatly exaggerated

Will the post-recession world of the New Normal cause long-term change in the pricing of high-end transactional legal services? Or, put more directly, does it mean that the sharp rises in the level of fees charged by M&A and banking lawyers in the two decades running up to the credit crunch will now halt or reverse? There is certainly no shortage of theorists and consultants arguing just that, with varying degrees of credibility.

In essence, it depends whether your view of the pricing headaches currently facing transactional lawyers – which have led to widespread low-balling as firms try to keep lawyers busy at unprofitable rates – is that they are largely cyclical or structural in nature. Clearly, huge pressure exists on M&A teams, but it remains far from proven that Western economies are witnessing a long-term drop in demand. The UK has seen a 40-year expansion in the size of its legal profession, coupled with major increases in profitability for commercial lawyers. That cannot have happened without real growth in underlying demand.

Over the last 25 years, liberalisation of capital markets, Western governments' addiction to pumping out new legislation and regulation and the expansion of global trade have also underpinned rising demand for legal services. None of these factors are going to disappear overnight, even in the face of a savage downturn and painful recovery.

There are two other arguments typically put forward as to why City lawyers must now face a period of static or falling prices for their services.

One compares law to manufacturing or global trade in goods, arguing that if the process can be broken down it can be commoditised, leading to a drastic fall in prices.

The other centres on claims that the role of general counsel has become dramatically more powerful in the post-recession age as businesses become more cost-conscious and risk-averse.

There is something to both arguments, but in many cases the claims are overstated. Though there will unquestionably be more commoditisation of law, it remains a service business, which limits the extent to which it can be parcelled up. That is partly due to the desire for face-to-face advice on complex matters, but on a more basic level it is about liability. Ultimately, the advised want to have an adviser on the hook for their advice – you can't sue a black box if it screws up a corporate takeover.

As to the rise of the general counsel, it is true that the breed has won more clout in Europe over the last two decades, but advocates for the ironman theory of the chief legal officer rather airily ignore the fact that the rise of in-house lawyers has coincided with the explosion in legal services inflation.

But perhaps the most basic fact that should give comfort to depressed transactional lawyers looking in horror at the butchery done to their charge-out rates is that law is a non-discretionary spend. No company chooses or desires to consume legal services – it is the inevitable and largely unloved by-product of doing business.

This oddly little-mentioned factor – that clients usually don't have the option not to seek legal services and therefore have weaker bargaining power – has been a major force underpinning the profitability of transactional law.

That won't be a message the prima donna partner necessarily wants to dwell on, but it remains good for business, and there's nothing in the New Normal to change that.

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