In November 2010 I posted a blog predicting what the landscape would look like for law firms in 2011. I predicted a year of strategic change with firms reducing cost by outsourcing services, improving IT infrastructure and internal processes, trimming headcount, improving pricing models, recruiting solicitors with a following and expanding their offering in areas of growth such as: litigation, insurance, employment and charities.
At the time many firms felt profits for 2011 would remain flat. However despite a tricky year for many firms, particularly those on the high street, commercial firms in the North (North West and Yorkshire) remain in a position of relative health, with 60% of law firms in the North West reporting an increase in profits in 2011 according to a survey by PwC. The average profit per equity partner in the North West increased to £246,000. However with the average profit margin dropping to 13%, many firms have found themselves doing more for less.
Surprisingly, despite challenging market conditions, litigation, Insurance and niche areas such as tax, pensions and charity law have all seen an increase in recruitment. Partner and senior solicitor level appointments have been popular; candidates with a following and achievable business plans being in high demand.
As predicted larger firms have started to look at more efficient ways of operating their own business looking towards legal process outsourcing, offshoring and even “North Shoring” – i.e. moving work to Northern offices where office space and salaries are cheaper. The practice of North Shoring is nothing new for firms with regional outposts and I expect this activity to increase. For example Addleshaw Goddard has increased staff in its Transaction Service Team (TST) from five at the time it was piloted in November 2010 to 42, with the intention of boosting numbers to more than 60 as it is used by more practice areas. www.legalweek.com/legal-week/news/2114471/addleshaws-ramps-ups-paralegal-centre-cut-client-fees . If expansion does happen in 2012 I expect it to occur in the regional centres of Manchester, Leeds and Birmingham, following the example of Gateleys who opened new offices in Manchester in 2010 and Leeds in January 2012.
Managing pricing pressure has also played a defining role in a firm’s success. It is here to stay with firms continuing to look at different pricing models such as fixed, capped and global fee structures as an alternative to the traditional hourly rate. Firms that embrace these changes and produce innovative pricing structures to suit their clients needs will
differentiate themselves, and will win work as a result, in this ever increasingly competitive market.
Make sure to look out for my next blog on predictions for 2012.