Most law firms in the UK will have closed Q1 at the end of an unseasonably wet July and, of course, the summer means we are also in financial reporting season and many firms in the top 100 are reporting solid, if unspectacular, income and profit figures. And as the fires continue to roar across Europe, and the UK resigns itself to another school holiday in wellies and umbrellas, leaders across the professional services sector are gearing up for their annual conferences in the autumn.
But with so much competition and uncertainty in the world, what should we be focusing on?
According to The Lawyer, the top 200 law firms account for the vast majority of revenues generated by law firms in the UK. The top 200 broadly covers law firms generating income in the range of £10m - £2.5bn…a very wide group indeed. Break that down even further and we discover that the top 100 businesses account for almost £34bn – or 94% of that income. But spare a thought for those in the lower half of the top 200 (roughly speaking those firms who generate somewhere between £10m and £40m). Those firms are fighting over 6% of the total amount of revenues generated in the UK from the legal sector…about £2bn. It sounds a lot but the top 100 are aiming at a target which is 15 times that size. That is a competitive place to be in. And the dynamics in the bottom 100 are identical to those in the top 100. So, what's to be done?
The legal sector is well known for its habit of focusing on the latest fashion and, this autumn, partner conferences up and down the land, no doubt, will be debating whether Artificial Intelligence is about to – or perhaps already is – eating into those profits. But it wasn't that long ago we were all talking about IBM's new AI programme, Watson, and ultimately that didn't get off the ground. While there is a heady whiff of déjà vu in the air right now, it does feel like this time round we will see real progress, and real change in the professional services sector, but let's not panic just yet. Law firms are resilient and lawyers are very good at adapting - and then normalising - what a few years ago was being trumpeted as revolutionary and transformative. Remember the frenzy around the rise of the use in alternate suppliers of legal services? The "alternates" as they are called, such as Lawyers on Demand and Axiom? All that is all so much part of the standard service delivery options available in the legal sector today, that it barely gets a mention, although to be fair LOD has been in the news recently, as we discovered it is about to be acquired again, this time by its US rival, Consilio. And good for them. BCLP saw a gap in the market and went for it, but others quickly followed and the legal sector has not collapsed it has just added a different way of providing services.
Likewise, the increased competition from the accounting/consulting arm of the professional services sector doesn’t feature in our daily updates any more but the revenues and profits in this arm of the profession have been growing steadily for more than 10 years, and today the legal arms of the "Big 4" accountancy firms deliver something approaching £300m in income. These dynamics, and the pressures on the professional services sector, have not gone away, but "traditional" law firms have normalised and adapted, and what was once regarded as cutting edge and innovative is now just another dynamic to negotiate for most law firms.
Today's successful leaders will need to deal with the competition in the sector, as well as wrestle with ChatGPT and what it means for the profession. They will need to have comprehensive EDI and ESG policies and if they don't their clients and people will want to know why they don't and, ultimately, those firms who don't evolve will lose out. Globalisation, and the need to be able to provide access to overseas legal markets, is increasingly important - just ask the leaders at A&O and Shearman. Rising salary costs and the challenges which come from hybrid working all need to be addressed, and all of this while the UK economy continues on its unsteady feet, while a war rages in Eastern Europe and the US contemplates whether to appoint its first President who might well be behind bars if elected.
Being a successful leader in a traditional law firm, in a fast moving sector, has always meant spinning many (sometimes competing) plates, but the basics - the things which the best law firms do well - are just the same as they have always been. Have a plan, communicate it, and execute it. All of these issues and topics we discuss at our annual conferences are issues we need to be aware of, and of course we need to plan appropriately, but let's not panic. Revenues in the legal sector have doubled in the last 20 years and it isn't showing any signs of slowing up. There are different issues to navigate like AI, and we have become, rightly so, more sophisticated in the workplace and businesses are evolving and developing their thinking. Competition may have changed in the way that it looks but it hasn't gone away.
The successful firms are those who do not panic, who recognise the need to evolve and to adapt but crucially have – and communicate - a clear vision and a plan which they execute.
Jonathan Blair is the Head of WBD Advisory, a professional practices advisory business within Womble Bond Dickinson LLP. Jonathan heads up the firm's London office and is part of the firm's international development group. Prior to this, Jonathan was the firm's Managing Partner for 14 years from 2008 to 2022 and in that time led the firm from its origins in Newcastle as Dickinson Dees, through its merger with Bond Pearce in 2013 and combination with US firm Womble Carlyle to create Womble Bond Dickinson, a transatlantic law firm with global revenues of over £350m.