For 26 years this report has had its finger on the pulse of the legal market. Identifying the defining event of this year hasn’t been tough: the coronavirus continues to dominate everyday life at the time of writing and the legal professional is no exception.
This year, our survey respondents were asked about the measures they’ve put in place to cope with the coronavirus and lockdown, the motivation behind coronavirus-related decisions, and how the business is likely to look like in the ‘new normal’.
The most common measure undertaken by firms throughout lockdown has been furloughing of staff – with 70% of respondents indicating their firm had done so. Firms based in London were less likely to have furloughed staff than their regional counterparts. While London-based firms account for two-thirds of responses to this year’s survey, firms based out of the capital make up three-quarters of those that did not furlough staff.
Partner drawings meanwhile have been reduced at just 60% of respondent’s firms. This shows that there are a number of firms that have relied on the government’s furlough scheme - intended to help the country’s struggling businesses stay alive -but have continued to allow their partners to withdraw regular sums of cash. There is potentially some reputational vulnerability here.
Less than 10% of firms have made staff redundant, however. As the impact of lockdown hits client sectors such as real estate and hospitality and as the furlough support winds down, this may rise.
When asked to state their main drivers when responding to the coronavirus pandemic, the top two results are perhaps unsurprising: the ability to ‘protect jobs’ is significantly ahead at 68%, while ensuring that ‘client service did not deteriorate’ ranks second at around 48%.
The third most popular response however is unlikely to have been shared in firmwide emails, as it smacks of an industry in panic. Over 40% of respondents indicated that their firm was driven by ‘ensuring firm survival’. This sounds dangerously like many firms were having to rely on government measures for their own survival. Those high levels of confidence reported in this year’s survey perhaps look misplaced.
Poor financial management has been a consistent them in this report’s 26-year history. There are scant signs of improvement, with lock-up at the UK’s top 200 firms at a five year high in 2020. Failure to get bills paid and manage cash flow has forced firms onto the good will of governments.
The real test is however yet to come, as the full impact of the economic downturn bites and clients are increasingly unwilling or unable to pay their bills. With most government-support schemes set to expire in October, ensuring the survival of the firm will become the sole responsibility of the firm . A few months later, the UK will leave the transition arrangements with the EU into an, as yet, undefined, Brexit arrangement.
Those firms that have managed to improve lock-up over the last few years (and there are some) have survived the initial impact of the pandemic with much more certainty. The experiences of 2020 should have created sufficient impetus for other firms to follow suit.
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. 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 publication.