A recent report painted a mixed picture of the sector’s performance during 2020. What do its findings mean for the profession, and how do they compare to the experience of individual firms?
On the rebound
A report released in May that examined the performance of the UK legal sector during 2020 made grim reading for large sections of the profession. The Gross Legal Product Index, compiled by the legal intelligence and analytics provider LexisNexis, revealed an overall year-on-year market decline of 4.3 per cent compared to 2019, with some practice areas facing much steeper falls.
Immigration was, unsurprisingly, the area most deeply affected by the pandemic, taking a 47% hit in 2020 compared to the previous year. The second worst-hit area was litigation, which suffered a 24% drop, followed by restructuring & insolvency, which fell by almost 18%, then property, which declined by 16%, crime, down 11% year-on-year, and competition, which ended the year 10% lower than 2019.
Within litigation, civil work was hit hardest, down by 35% over the course of 2020, with criminal litigation also down by 7%. Employment litigation and family litigation, while also down for the year as a whole, both began to see growth in the final quarter of 2020.
For some non-contentious practice areas, by contrast, 2020 proved to be a boom year. As companies navigated the pandemic the biggest winner was risk & compliance, which grew by 22%, followed by commercial, which was up by 11%, tax, at nearly 7%, employment, up 6% and corporate, which grew by 3% – the latter driven by work relating to stock market listings, bonds and loans.
Family and private client also experienced modest growth, up by 2.7% and 2.2% respectively. Within private client, enquiries relating to wills increased by 75% and, sadly, the pandemic also led to increases in probate work, but this was offset somewhat by falls in work relating to foreign direct investment and trusts.
We are, of course, now five months into 2021 and a number of areas have moved on. The headline figures also mask different pictures at different firms.
Investing in the “new normal”
Reflecting on last year, Linda Woolley, managing partner at the London-headquartered Top 100 firm Kingsley Napley said, “2020 was a highly volatile year. In the early stages of the pandemic, we saw a sudden slow down across a few areas of our business.
“As our clients adjusted to the ‘new normal’ of life in lockdown, demand returned pretty-much across the board. We took the initiative to service this by hiring at partner level across a number of our non-contentious areas, such as corporate, commercial and real estate.
“Over the last few months, we’ve continued this growth, bringing on partners into our medical negligence and private client businesses as well as building up our insolvency capability in the expectation of clients, unfortunately, needing support in this area.”
Kingsley Napley’s investment in its insolvency team is not unique, and is backed by the LexisNexis GLP index, which expects the fortunes of this practice area to turn around as government support for businesses is withdrawn later in the year. It also points to a 9% increase in personal insolvency work during the final quarter of 2020, which it identifies as a leading indicator for corporate insolvencies.
Positive on property
Real estate work, too, appears to be coming back – and not just residential sales boosted by the Government’s stamp duty holiday. This has certainly been the experience of Scottish firm Balfour + Manson, which has offices in Edinburgh, Aberdeen and Glasgow.
Hugh Angus, commercial property partner at the firm, told The Brief, “Of course, it is interesting to see how others have fared from the start of 2020 to now, particularly as I think we have performed differently from how we would have expected.
“While our overall transaction levels have held up well there was definitely a downturn at the start of lockdown. However, levels picked up considerably over the summer, and have remained good.
“Moreover, we have benefitted from having a broad mix of clients, both local and national, perhaps a little under-represented in both landlord and tenant retail. One thing we have all learnt from the pandemic is that predictions are difficult, and what has happened in the past is no guide to future performance.
“There is a clear benefit in having a broad mix of work, across the firm and in each department.”
The fast-growing fee-share firm gunnercooke is also bullish about the prospects for property, along with corporate work – driven now by M&A transactions and foreign investment. Paul Meredith, international director at gunnercooke, said, “The legal industry faced a tough time in 2020 and, as expected, some areas suffered more than others.
“However, we are seeing strong signs that it’s back to business as usual for large corporates in the UK and internationally. This is despite the uncertainty of Brexit and recovering economically from lockdown.
“Our corporate team are busier than ever, with some partners completing multiple deals per week. Our international experts are seeing promising indications that the UK is still seen as an attractive prospect for cross-border work and investment, and we expect this area to be busier than ever over the coming year, particularly as we grow our firm’s presence overseas.
“Despite the challenges outlined in the report for the property industry, our commercial real estate team have seen work pick up over the previous months as clients face issues with leases and more challenges to the way they operate. We’ve had to recruit additional partners in this area to support the demand from clients.”
A number of practice areas will, of course, remain challenged, and although some might be able to “pivot” their offerings to take advantage of different opportunities, it is difficult to see how fields like immigration will return to pre-pandemic levels any time soon. Nonetheless, the medium-term prospects for most of the legal sector look decidedly brighter now than they did 12 months ago.