Business confidence edges up, but a third of firms still predict steep revenue falls
Poll of 170 UK law firms finds 91% have now furloughed staff as they anticipate shift to remote working
Business confidence in the UK legal sector has edged up since the height of the lockdown, with the number of firms predicting a decline in revenue of more than 25% falling from almost half in April to a third in May, according to a survey published today.
However, the survey of 170 law firms, which was conducted in early May by accountancy firm Saffery Champness and the Institute of Legal Finance & Management, also found that almost a third of the firms surveyed are bracing themselves for a fall in profit of more than 25% over the course of the year, while 10% anticipate that they will make no profit at all.
Ninety-one percent of the respondents have now furloughed staff under the UK Government-sponsored scheme, up from 77% in April.
And the number of firms that have commenced redundancy negotiations with staff has increased from 6% to 10% this month.
The poll, which focuses on the mid-market, supports the widely held belief that attitudes towards remote working are changing due to the pandemic, with more than half (57%) of the respondents predicting there will be a ‘moderate to large change’ in their remote working policy in the future.
However, just 8% of the respondents predicted a fundamental change and a third (29%) said they anticipated only a slight easing of policies.
Meanwhile, the number of firms that have reduced partner drawings has increased from 42% in April to 54% in May.
The majority of surveyed firms, however, are reluctant to reduce salaries, with 78% maintaining them at their current level, and 80% sticking to pre-pandemic contractual working hours.
Of the firms that have recently made job offers, 20% have chosen to withdraw them — a proportion that is largely unchanged since the last survey.
Just over half the respondents (55%) have delayed or cancelled promotions or pay rises scheduled for 1 April, up from 53% last month.
Ian Johnson, director in the professional practices team, said: “Even during the apex of the pandemic a few weeks ago most firms were keeping one eye on their long-term resilience, concerned with maintaining their competitiveness throughout the crisis and when we emerge into the post-Corona landscape. This seems to still be the case, with most firms choosing not to rescind job offers or implement large scale redundancies.
“That being said, the results certainly do not show any evidence of a return to business as usual for law firms, and the vast majority are rightly still concerned with ensuring profitability during this turbulent time.”
Eighty-three per cent of the firms in the survey had a turnover of up to £10m, 13% had a turnover of £10m-30m, 2% where in the £30-100m bracket and 2% had an annual turnover of more than £100m.
Last week, business advisory practice Quantuma, which specialises in the mid-market, predicted a wave of law firm failures after completing the pre-pack sale of leading regional firm McMillan Williams Solicitors to Taylor Rose.