A majority of law firms are confident about the business outlook for their practices even as the coronavirus pandemic dampens economic activity and as the UK edges closer to a no-deal Brexit, according to Smith & Williamson’s 2020 Law Firm Survey.
Some 69% of respondents said they feel reasonably confident about the outlook, with a further 11% feeling very confident. Only one in five firms say they feel not very or not at all confident about their business outlook. By contrast, during the 2008 global financial crisis, 42% of firms said they were not very or not at all confident about the outlook.
Giles Murphy, head of professional practices at Smith & Williamson, wrote in the report: “The source of confidence in 2020 isn’t particularly clear. It could stem from the fact that many senior executives successfully navigated the 2008 crisis, and so feel better prepared this time around. It could also be that the government’s support measures are providing what many feel is a safety net; indeed 70% of the firms in this year’s survey have signed up to the government’s furlough scheme.”
The survey, which was conducted by The Lawyer for Smith & Williamson, showed that almost a third of firms believed competitive pressure in the legal profession has significantly increased over the past year, with 43% noting a slight increase.
While many law firm leaders say they feel confident about their business outlook, few firms are in growth mode. Roughly two-thirds of firms said they have no plans to expand geographically in the next year. Last year, just over half were making expansion plans.
Lock-up also remains an issue at many firms. While last year a majority of firms said they expected to improve their lock-up over the following 12 months, few seem to have done so. Separate data published by The Lawyer earlier this year showed that for the UK’s top 200 firms, lock-up was at a five-year high. Some 59% of respondents this year said they expect to see a slight improvement over the next 12 months, with 7% expecting a significant improvement.
The report’s authors are not optimistic, however, writing: “This improvement (if it ever happens) will come too late with many firms having to take out additional debt facilities, defer distributions and take advantage of government tax deferral arrangements as they did not have sufficient cash resources to survive the pandemic’s impact.”