Law firms warned to adapt or risk “unprecedented losses”

Law firms across the UK are being forced to enact drastic new cost-cutting measures, as government support schemes launched in response to the coronavirus come to an end.

A new wave of redundancies, salary freezes, and pay cuts is expected to hit the legal industry, as firms grapple with the knock-on effects of Covid-19. National and international companies have reported major profit losses since January, and experts have warned further hardship could be on the horizon.

In the six months since the UK government announced lockdown measures, 80% of firms have been forced to furlough staff and cut partner compensation. Many firms have asked their highest-earning employees to take pay cuts of up to to 20%. Firms specialising in housing, family, and criminal law have been hardest hit, due to court delays and stalling within the property-market.

Speaking to the Financial Times, Giles Murphy, head of professional practice at accountant Smith & Williamson, said very few positions would be safe following the economic downturn.

He said: “As the full impact of the economy hits firms, activity levels are likely to fall and firms will need less staff. At that point, the expensive ones may be at risk.”

Although the legal industry is generally regarded as more resilient than other sectors of the economy, the unique pressures presented by remote working have left many firms on their knees. The move toward digital working has resulted in many solicitors providing their legal services online which has rendered a huge score of support staff unnecessary, making their roles particularly vulnerable in the coming months.

A new approach

As the world adapts to a new, digitally focused work world, economists are urging law firms to be flexible in their client approach.

According to McKinsey’s Financial Services Practice, firms are facing unprecedented demand for digital connection with their clients and could benefit from taking a fresh approach to marketing.

They said: “The business context has shifted dramatically, presenting unprecedented challenges. Law-firm partners should proactively connect with and really listen to clients and their needs. Even a two-line personalized email can send the right message. Ask yourself what innovative channels, beyond the standard articles or emails, can you use to get your perspectives to clients?”

This ethos is being echoed across sectors, as an increasing number of professional services look at how they can ride the digital wave.

Speaking to Forbes, marketing expert Sanja Komljenovic said firms could actually benefit from the increase in client internet usage.

He said: “Right now, internet usage is up by 50 to 70 per cent. Marketing strategies — now and after the pandemic  — should centre on using content to create powerful online connections. By humanizing your brand and speaking to consumers’ concerns — not your company’s — you can nurture an ongoing conversation, even among those who are in precarious financial situations or juggling multiple responsibilities.”