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All change!

22 November 2011 

We are witnessing a period of unparalleled change in the legal services market, so for anyone hoping to enter the profession it is vital to understand the nature of those changes and what is underpinning them.

Many have suggested that the two principal causes of these changes are the Legal Services Act 2007 and the global economic crisis. However, whilst it is undoubtedly the case that they have each impacted the market, they have not in themselves caused the changes that we have already witnessed and continue to see but have merely accelerated the rate of change.

So – what are the changes that have taken place?

Thirty years ago, most UK law firms were largely indistinguishable from one another. They were all, without exception, partnerships where all the partners without exception were themselves qualified solicitors. Indeed, that was the only business structure permitted by the profession’s then regulators, the Law Society. The vast majority of those firms were small, with between one and 15 partners, and the vast majority of them carried out the same kind of work, delivering their services to their clients in much the same way from one firm to the next.


The years since then have seen rapid and dynamic change, with the pace of that change increasing dramatically over the past 10 years which has witnessed the largest firms pulling away from the pack in terms of size and revenues. For example, one such firm had 530 partners in 2001.   In2011 this number has doubled to 1300 and with profits drawn by the more senior partners increasing by around 100%.

During that same period there have been many mergers of law firms, the belief being that the larger the law firm, the greater the economies of scale it could enjoy and the greater the profits it could generate for its partners. Now barely a week goes by without some announcement/speculation about a merger amongst the UK’s TOP 100 firms – and there is probably greater activity still taking place in the smaller firms that goes largely unnoticed by the legal media.

And the type of work carried out by law firms has changed over this period. There has been a drive towards specialisation even in the smaller “high street” practices, so that the days of the once ubiquitous “general practitioner”, as typified by media creations like Stephen Fry’s Peter Kingdom are numbered if not already obsolete.

So - what have been the drivers of all this change?

1. Relaxation of regulation


 From the mid 1980s there has been a series of measures introduced to relax the tight and, some would say, anti-competitive regulation of legal services. The intention of this series of measures has been to bring greater competition into the marketplace in order to drive down costs and, it is argued, drive up the quality of service to the consumer.  Starting with a relaxation on the then ban on law firms being able to advertise their services, and picking up apace with The Legal Services Act which has been brought into force in phases since 2007. The final piece of the jigsaw was put in place on 6th October 2011 when that part of the Act which enabled the creation of “alternative business structures” for the delivery of legal services which had previously been the sole preserve of solicitors firms came into force.

2. New entrants to the market increasing competition

The effect of this deregulation has been for the market to open up to competition from new entrants. No longer is it the case that in order to get legal advice a member of the public has no choice but to consult a firm of solicitors and the public are increasingly looking to alternative providers of legal services. Recent new entrants to the legal services market include the consumers’ champion, Which?, with their “Which? Legal service” claiming to offer their members unlimited legal advice from only £51 per year and the new online service from the Halifax – “Halifax Legal Express” - offering its customers the chance to download legal documents only, or documents with a limited level of legal guidance, through to full lawyer service. Co-op Legal Services last year helped more than 200,000 clients with a variety of legal matters including personal injury and employment claims, as well as wills and conveyancing and in the last few weeks have announced a move into the arena of family law.

3. Developments in technology

It is hard to imagine a time when there was no internet and mobile phones were few and far between and the size of a house brick, but that was precisely the case fewer than 20 years ago. Since then, technology has changed the way we all live and work – and the world of legal services is no exception to that. Then, to manage their clients’ cases, lawyers had to make notes in hard copy diaries to remember what steps to take next and when. Now, there are sophisticated case management systems which eliminate human failure and speed up processes, meaning that the clients can get their cases resolved faster, cheaper and with higher rates of satisfaction than could have been conceived of 20 years ago.

And that is just the start of it. Communication has changed beyond recognition so that whilst clients then would patiently wait to receive letters from their lawyers which could take a week to 10 days to arrive after laborious dictation by the lawyer to their secretary, now the usual form of communication is by instantaneous email or text. Then, clients had to wait to be kept informed by their lawyers on the progress of their case; now many clients expect to be able to have internet access to be able to see for themselves at the press of a button where things are going, like tracking a delivery of a parcel. They expect their lawyers to be at the other end of a (mobile) phone and to have access to them outside of the rigid 9.00 to 5.00 “traditional” office hours. And those lawyers who can’t or won’t meet those expectations are finding it difficult to compete.

Where once it was thought to be ahead of the pack to even have a website, however dull and uninspiring it might have been, it is now unthinkable for a lawyer not to have a website and the best ones are very sophisticated indeed, many of them carrying “free” legal advice as a ”taster” of what the client could buy if they were to select that lawyer for their work. More adventurous lawyers harnessing the power of mass communication available through social media sites such as Twitter, LinkedIn and Facebook – and those that aren’t are finding themselves left behind by the others in the race to secure new leads and new clients from those leads.

4. Innovation and globalisation

The availability of high speed broadband and more portable and flexible technological solutions such as the i-Pad and other tablet hardware has meant that lawyers can be more flexible about how and when and where they work – more responsive to client demands for that flexibility and more innovative in the solutions to their clients’ needs. And it has facilitated the ease with which lawyers can work all over the globe for clients who, equally, may be in multiple geographic locations. As opportunities open up for UK-trained lawyers around the world, in Asia and the Pacific, South America and Eastern Europe, it is those lawyers who have embraced new technology and new ways of working who will be able to reap the benefits.

5. Commoditisation

Commoditisation is the name given where legal processes which once were all carried out by qualified lawyers can now be broken down and compartmentalised, so that the more straightforward, repetitive processes can be carried out by less qualified or non-qualified staff – or even outsourced altogether, to another office of the firm, or to another firm with lower overheads who can do the job cheaper and represent clear cost savings to the client even after the outsourcing firm has taken their cut of the deal, or even off-shored and perhaps sent to the other side of the world to another type of organisation altogether. In the not-too-distant days before the internet and high-speed broadband, such extreme examples of outsourcing/off-shoring could not have been imagined. Now, those firms who are working to such solutions can create real value for their clients and a really competitive edge to the services they offer.

6. Shift in balance of power

All of the above, combined with a slow-down in the economy, has meant that there has been a fundamental shift in the balance of power, from a position where lawyers could call all the shots, dictate terms of business including when and how they could contact and be contacted by clients and how much they could charge and the way those charges could be calculated, to one where the client is very much in the driving seat. Competition for clients is more fierce than ever before and clients are now expecting real value to their businesses to be demonstrated by their lawyers involving a partnership approach to the client/lawyer relationship with transparency of fees, innovative solutions, proper dialogue and first class client service.


What does all this mean for aspiring lawyers?

There are opportunities for graduates in the law, but whilst entry to the legal profession has always been competitive, now young aspirant lawyers in the UK face more competition from more quarters than ever before, both at home and abroad. You will need a clearly defined career strategy and expert advice from the very start and you will need to develop and to evidence wider skills than ever before, from business development and marketing to financial, leadership and change management. Knowledge of the law will be a given, but only a starting point. Start now by using the resources on the Future Lawyers Network, including our 10 StEP programme to your future legal career!



 

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