Nearly two in three Irish law firms has recorded a decline in revenue over the last year, with six out of ten citing maintaining profitability as a key challenge facing the sector over the next two to three years.
Almost all firms surveyed identified the economy as the key issue facing the legal sector over the next three years, as sentiment has significantly declined with 80% seeing the outlook deteriorating for the sector over the last 12 months.
These results form part of a new report from accountancy and professional services firm Smith & Williamson in its 9th Annual Survey of Law Firms in Ireland, an annual study of the Irish legal sector carried out by market research consultancy, Amárach. This survey delivers key insights into the sector’s outlook and attitudes, performance and opportunities, talent and reward.
As well as the economic challenges posed to the country by Brexit, this year also saw a number of other unprecedented challenges emerge due to the pandemic.
Almost all firms (94%) outlined they believed Covid-19 had resulted in a negative outlook for the sector, while more than half (56%) of all respondents stated it was “significantly negative”.
Staff numbers were also impacted over the last 12 months, as just over one in three of all practices surveyed said they had decreased staff. However, of the respondents, 40% of the top 20 firms had increased staff numbers this year. One in three practices also reduced fee earner salaries, while 40% of the top 20 implemented salary reductions of 10% or more.
In a bid to protect jobs, seven out of ten firms chose to use the state-backed Temporary Wage Subsidy Scheme. In addition, almost one in three practices surveyed laid-off staff who could then opt for the Pandemic Unemployment Payment. While there was a significant (80%) decline in sentiment for the sector over the last year, almost three-quarters of firms (73%) see the outlook deteriorating for the next 12 months.
Two thirds of law firms said revenues had declined over the last year and one in three of all those surveyed recorded a decline of more than 20% over the last 12 months. More than half also saw their profits decline this year, a dip of 10% on average among the top 20 firms and more than 20% elsewhere.
Business flows have inevitably been affected by the pandemic, with courts closed and adapting to remote working all having an impact on billing. In addition, firms with clients in exposed sectors have experienced an impact on the ability of some clients to pay. As a result, law firms have seen lock-up rise and many have implemented pay cuts, reductions in partner drawings and distributions and reduced their overheads.
Many of the challenges facing law firms prior to the pandemic continue apace, as growth rates slow, Brexit looms and competition for talent increases. Indeed, the pandemic may also serve to widen the gap between technology-enabled larger firms and under-invested smaller firms.
The research revealed that while most firms’ technology infrastructures coped well with the massive increase in staff working from home, top law firms continue to be a target for cyber criminals and are experiencing a significant number of online security threats. Two thirds of the top 20 respondents cited experiencing a cyber-attack in the past 12 months. While the majority of these incidents - over 60% - did not result in any impact, there were some (17%) survey respondents who reported significant implications for their business from a cyber-attack.
Commenting on the results of the survey, Paul Wyse, Smith & Williamson’s Managing Director, Professional Services in Ireland, said: “The Covid-19 pandemic has demonstrated the need for all organisations to be able to weather major unforeseen disruption. The insights in this report reveal the challenges and opportunities for the legal sector at this unprecedented time. Legal firms have had to adapt and will need to develop their strategies further for the new era in the areas of business development, team culture and work flexibility while being increasingly diligent around lock-up, cash collection and maintaining profitability.
“Our commitment to the Irish market as a top 10 practice remains steadfast and I’m proud of the efforts the team at Smith & Williamson has made in providing our clients with the service and support they need. This year, Smith & Williamson became the European Hub for the wider Group, demonstrating our commitment to the Irish market.”
The report was presented to members of the legal sector at a virtual event, which was opened by James Browne TD, Minister of State at the Department of Justice and Equality with responsibility for Law Reform.
Smith & Williamson’s annual legal survey, which began in 2011, was conducted by Amárach Research during autumn 2020 and canvassed 87 large, mid-tier and small firms across the country, including 15 of the top 20.
For further media enquiries:
We have taken great care to ensure the accuracy of this publication. However, the publication is written in general terms and you are strongly recommended to seek specific advice before taking any action on the information it contains.
Smith & Williamson Freaney Limited Authorised to carry on investment business by the Institute of Chartered Accountants in Ireland. A member of Nexia International.
Notes to editor: Smith & Williamson has been managing the financial affairs of private clients and their business interests for over a century. Smith & Williamson first entered the Irish market in 2008 through the establishment of a Tax and Business Services division following a merger with Oliver Freaney & Co, itself established in 1958 and one of Ireland’s leading firms of chartered accountants and business and tax advisers. In April 2011, the firm's existing Irish services were expanded with the launch of full service investment management and retirement planning capabilities.
Smith & Williamson currently employs over 120 people in Ireland. In Ireland, Smith & Williamson has offices in Sandyford, Dublin City Centre and Belfast.
On 1 September 2020, Smith & Williamson merged with Tilney to form the Tilney Smith & Williamson Group: https://www.tsandw.com/.