What a result - early financials prove awkward for Cassandras
The legal profession is facing a period of unprecedented upheaval that will see clients push through radical changes at service providers and usher in new technology to hugely improve efficiency. Actually, I don't believe a word of that sentence, but you won't struggle to find such pronouncements made about the legal profession. In fact, you wouldn't have struggled at any time during the last 10 years, but a banking crisis, a deep recession and a wave of law firm restructurings gave a bit more weight to such predictions.
June 01, 2011 at 07:03 PM
3 minute read
"The legal profession is facing a period of unprecedented upheaval that will see clients push through radical changes at service providers and usher in new technology to hugely improve efficiency…"
Actually, I don't believe a word of that sentence, but you won't struggle to find such pronouncements made about the legal profession. In fact, you wouldn't have struggled at any time during the last 10 years, but a banking crisis, a deep recession and a wave of law firm restructurings gave a bit more weight to such predictions.
Unfortunately, the legal industry keeps refusing to play ball, judging by the financial results emerging so far. While there are a few firms struggling to find their form, a larger group have unveiled very substantial increases in revenue and profits.
Perhaps most remarkable is Mishcon de Reya, which has achieved a 29.5% increase in the top line, a feat I'm struggling to recall any major law firms managing in any market, let alone today's gloomy trading environment.
There also has not been a shortage of law firms achieving double-digit increases in fee income, among them Berwin Leighton Paisner and Stephenson Harwood, and an even larger group has seen sharp increases in profitability thanks to the cost-cutting of two years ago.
Almost certainly the final picture for top 50 UK law firms will be less impressive, not least because the larger firms aren't sounding hugely bullish and because those with worse results tend to delay revealing their hand. But it seems apparent that 2010-11 will emerge as another very respectable period of recovery for commercial law firms – building on last year when revenue was held static and partner profits increased by nearly 9% across the top 50.
This will be an awkward outcome for those perennially finding the model of law to be broken or in need of breaking, though in some cases the easiest solution is to just ignore the facts. (The Economist managed such a feat recently while peering into the US results season and finding only gloom despite a collective 8% increase in profitability; I'm an admirer of the title, but it never convinces when it covers the legal services market.)
That's not to offer this resilience as unambiguous evidence of the brilliance and graft of the UK legal profession. In many respects UK law firms do lead the world in legal services but there are many factors outside the control of law firm leaders that keep this train hurtling down the track.
Among these are the defensive and contradictory nature of how in-house legal teams instruct law firms, the influence of banks in supporting a select elite for 'City' work and the addiction of Western governments to pumping out primary law and red tape. Until those factors are properly accounted for, predictions about the legal industry will continue to be largely either blindingly obvious or just plain wrong.
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