Trends affecting the legal profession

EU flag fraying

In a competitive recruitment market where the standards keep getting higher and higher it pays to know your stuff. Here are the main issues you should be aware of.

The B word

How is Brexit affecting law firms? “That's a great question – and one we ask at training contract interviews,” one training partner responded. “We phrase it as: is it an opportunity or a threat?” The answer to that question is for you to decide, but what you need to know is that Brexit matters to lawyers for two reasons: first, because it raises the possibility of changes to literally hundreds of laws, rules and regulations which govern how businesses operate and how the country is run – from IP and immigration to finance and food standards. Second, Brexit will affect the UK economy – so far, the recession many feared has not materialised, but we'll say more about the state of the economy below.

Lawyers are in hot demand to explain to clients in every sector how they should position themselves for Brexit; some commentators have said wryly that the only people who will benefit from Brexit are lawyers and consultants. Generally larger law firms are doing more Brexit-related work, as their clients are more likely to be businesses with international or European operations. “Brexit is generating enormous amounts of work for us,” a partner at a magic circle firm told us. “Simple things like how clients label their products are requiring a significant legal rethink. There's also a huge amount of work coming in for our international arbitration and trade lawyers. In times of uncertainty, clients look to us for reassurance.” And the need for legal advice about Brexit will only intensify after the UK leaves the EU on 29 March 2019. “It’s in the months and years after the final shape of Brexit becomes apparent that there will be a demand for a whole range of legal services flowing from the gradual decoupling of UK law from the whole body of EU law,” one training partner told us. “For the generation of lawyers beginning their careers now, that will be a fascinating part of their professional lives for quite some years to come.”

“After the final shape of Brexit becomes apparent there will be a demand for a whole range of legal services.”

A key area of the economy – and legal practice – affected by Brexit is financial services. The main issue is whether UK-based firms will retain their 'passporting' rights to trade in the EU. It now looks as if passporting will end post-Brexit, as the government has committed to leaving the single market for services. This could still change and the government has said it wants to remain as close as possible to the EU single market. Still, the financial services sector has witnessed only minor disruption so far: the latest figures show banks intend to move only around 5,000 jobs out of the UK as a result of Brexit, much lower than original estimates of tens of thousands of jobs going.

How are law firms themselves reacting to Brexit as businesses? A common refrain we've heard from global and international firms is that their growing presence overseas will help shore up any stumbles in the UK – that's great for the firms, but not much comfort to trainees and other employees in Britain if jobs are moved abroad. Firms including national outfit Pinsent Masons and US firm Covington have opened offices in Dublin while US firm Sullivan & Cromwell, City firm Macfarlanes and IP specialist Bristows have all set up shop in Brussels. “It’s all about maintaining our presence in Europe after Brexit!” a senior source at Bristows exclaimed, sounding somewhat like they were afraid of being cast adrift in the English Channel. Firms are responding to Brexit in different ways: in 2017/18 we've spoken to one major firm which admitted cutting trainee recruitment numbers because of Brexit and another which said it was “sanguine” about the whole thing. “We haven’t done anything to respond to Brexit,” a partner at a big American firm in the City asserted. “We haven’t changed our investment plans for London or moved activities to Frankfurt or elsewhere on the continent. Increasingly I think that our London office will remain important as this is a vital centre for capital raising, banking and insurance and all of that will continue post-Brexit.” 

However, uncertainty remains the major hallmark of Brexit at the moment, as law firms seek to counsel their clients on what to do while themselves remaining unsure whether Brexit will come out of the oven hard, soft or half-baked. “Everyone is waiting for the impact,” a training partner at a national firm told us. “The legal market generally feel pretty buoyant. All areas are doing well. As for Brexit: it's a case of wait and see. Clients are trying to prepare but not sure where to look.” Another training partner said simply: “It's a rollercoaster.”

Brexit commercial awareness primers:

The effect of Brexit on lawyers
Brexit, business and the law
Brexit effects by practice area

 

It's the stupid economy

So has the Brexit vote been bad news for the economy as was predicted? Well yes and no, as summed up by this managing partner: “Transactional work quietened down right after the referendum, but activity levels picked up quite a lot during 2017. I think what we're seeing now is a drag effect on the UK economy.” That 'drag effect' means GDP grew a measly 1.8% in 2017, the slowest rate in five years and slower than the eurozone – other economies are growing much faster.

The IMF predicts the UK economy will grow by 1.6% in 2018. This is down on what was expected before 2016 and the slowest projected growth rate for any major global economy. But it's still much better than what was predicted would happen after a leave vote in the EU referendum. The CBI says economic growth will remain 'steady yet subdued' – i.e. the UK economy is just about fine but could've been growing faster if it weren't for Brexit. The senior lawyers we spoke to at commercial signalled no sign of slowdown in their corporate or real estate work – early indicators of economic trouble.

A lot of projects and deals were briefly put on hold after the Brexit referendum, but “once people got their nerve back, those projects proceeded,” a source explained. Another training partner continued: “In the past 12 months commercial activity has picked up much more, with clients making plans and looking to adapt their businesses to address everything related to Brexit.” We did hear murmurs of concern in some quarters though. For example, one partner at a firm that deals with a lot of startups said they'd heard “anxieties about the pot of money available for investment” – some had previously come from the European Investment Fund which means it could dry up. This is an example of what one regional firm's training partner identified as “the indirect effects of Brexit on the businesses we work for, and on their profits and need for legal work.”

Recruiters want you to be able to understand the journey the UK and global economies have been on in the past few years.

Globally, Brexit is far from the only worry people have about the economy. Growth has been slowing in China, Russia and Brazil, though eurozone growth has picked up notably. In the US Donald Trump seems intent on starting a trade war with... well, just about anyone. Investors were pleased with Trump's tax cuts and deregulation and the US economy grew by 2.3% in 2017. But Trump has now effectively started a trade war with China with the tit-for-tat imposition of tariffs. While the Brooking Institute says the effects should be relatively minor, the governor of the Bank of England has speculated  US growth could be hit by as much as 5%. Trump has threatened to hit Europe with tariffs too.

In the UK, public spending cuts continue to affect work relying on government funding, like renewable energy projects and rail upgrades. Have a read of our practice areas overviews to find out how government policy affects it. Most big commercial law firms have seen revenues increasing in 2017/18, though some continue to struggle. In the decade since the financial crisis, the world has not witnessed the destruction and reforming of the financial system that some had hoped for, nor has there been a particularly buoyant recovery. Recruiters want you to be able to understand the journey the UK and global economies have been on in the past few years and how trends in different sectors, and Brexit, may affect their firm.

 

Bye bye LPC, hello SQE

As if Brexit, Trump and economic lethargy weren't enough to deal with, aspiring lawyers now have to get their heads around a monumental overhaul of the system of how you qualify as a solicitor. The changes are huge: the Solicitors Qualifying Examination (the SQE) will replace the GDL and LPC, and is to be introduced from 2020. It will consist of two big sets of exams – one at the beginning of the training contract and one at the end – administered by Kaplan. Elsewhere on this website you can find everything we know to date about how the new SQE will work.

The SQE is part of the SRA's attempt to deregulate and liberalise legal training, in part to help improve access to the profession and reduce cost to unsuccessful candidates. This trend has already seen the regulator change the way paralegals can qualify as a solicitor (they don't need to do a training contract first). The Bar Standards Board is minded towards reform of the route to becoming a barrister too: following a consultation the Bar's regulator is investigating whether it can reform and improve the qualification process and/or launch alternative routes into the profession. This could involve splitting the Bar Professional Training Course (BPTC) in two, so it's possible that course will find itself on the rubbish heap alongside the LPC.

Even prior to its announcement of the SQE, the SRA had been conducting something of a bonfire of the regulations related to trainees and recruitment. In part this is a reaction to the 2013 Legal Education and Training Review (LETR). An SRA spokesperson told us: “First, the changes are a result of our commitment to cut red tape. We sought to remove rules which did not relate to quality and standards in the profession. Second, in response to the LETR we looked at what changes we could make within the existing framework to allow more flexibility.” In other words, the aim is less bureaucracy and more flexibility in order to broaden access to the profession.  

Here are some of the changes the SRA has introduced in the past few years: 

  • Paralegals can now qualify as solicitors without getting a training contract if they have done the LPC and fulfilled certain training criteria.
  • Training contracts are now referred to as 'periods of recognised training' by the SRA. Law firms still use the former term.
  • The SRA has withdrawn from the voluntary graduate recruitment code of conduct. “It was not enforceable, it was not a regulatory task and it was disingenuous,” the SRA told us. “The SRA being a signatory could have given the impression that the code of conduct is a regulation when it is not.” The Junior Lawyers Division and two graduate recruitment associations remain signatories, while the Law Society has stepped into the SRA's place as a supporter of the code.
  • The SRA is no longer the guardian of partial exemptions to the GDL for mature and overseas students. Providers now deal with these themselves. The SRA only deals with full exemptions.
  • Rules surrounding part-time LPC study and part-time traineeships have been relaxed, so part-time study and training can now be undertaken in any desired format. 
  • There is no longer a specifically stated requirement for trainees to undertake both contentious and non-contentious work. However the SRA's 'practice standard skills' mandate experience in both transactional work and disputes, so in practice this rule remains the same.
  • Students are no longer required to enrol with the SRA (which used to cost £80).

Despite the SRA's efforts to ease access into the profession and the appearance of apprenticeships, the path to becoming a lawyer remains a tough one. The Law Society doesn't mince its words about the risks"Qualifying as a solicitor is not easy," intones its website. "Many trainee solicitors finish their training with debts. Others are not able to finish their training because they cannot get a suitable training position. There is no guarantee of getting a job either as a trainee or as a solicitor." We couldn't agree more. Be warned that the biggest LPC providers like  BPP and the University of Law are profit-making businesses and have a vested interest in more graduates studying with them.

So: you should consider your options very carefully before parting with any hard-earned cash to pay for law school. Most trainees we interviewed for this guide secured their training contracts before starting law school, and all other things being equal this is the course we advise you to follow. Starting law school without a training contract lined up will always be a calculated gamble. Elsewhere on this website you can read more about How to fund law school.

As an added incentive most commercial firms will pay all or part of your LPC fees as well as a living allowance; smaller non-commercial firms do not usually do this. See our Table of salaries and benefits for full details. We should also point out that your future is in your hands: whether you land a traineeship or NQ job depends on how hard you work at getting the right experience, learn what firms are looking for, and target the right employers. For more advice on this topic read our feature What are legal recruiters looking for?

 

Survival of the fittest

One difference between the legal profession today and ten or 15 years ago is that the biggest firms recruit relatively fewer trainees. For example, the elite City firms known as the 'silver circle' were looking to recruit 305 trainees (to start in 2011) when we asked in 2008, but want just 195 to start in 2021 when we asked this year – one of this group of elite firms, KWM, has even gone bust! The same story is true outside the capital: five big national firms (AddleshawsDLA PiperEvershedsPinsent Masons and Squires) were in the market for 325 trainees in the 2008/09 recruitment cycle, but are looking for just 260 in 2018/19. The good news is that recruitment numbers at some firms are actually up, and there are new recruiters in the market (especially US firms). The number of traineeships up for grabs each year appears to be relatively stable with 5,719 registered in 2016/17, roughly the same as the year before.

Here are the stats for entry into the profession in the past decade which show recruitment numbers see-sawing then slowly edging upwards in recent years:

  LPC students and training contracts                    
      '07/08   '08/09   '09/10   '10/11   '11/12   '12/13   '13/14   '14/15   '15/16   '16/17 
                                           
  LPC enrolments   9,662   9,337   7,064   6,067   5,909   5,673   5,198   N/A   N/A   N/A
                                           
  Training contracts   6,303   5,809   4,874   5,441   4,869   5,302   5,001   5,457   5,728   5,719
                                           
  Admissions to the roll   N/A   8,491   8,480   8,402   6,330   6,758   6,345   6,077   6,346   6,478

Source: the Law Society

But it remains the case that there are now fewer training contracts on offer than before 2009. In part this is a legacy of the recession: firms have learnt to do more with less. With tighter budgets, clients are demanding greater value for money. They are no longer willing to pay for a junior lawyer to sit in a room photocopying if a temp can do the same for peanuts. New technology and outsourcing are also hitting demand for trainees, with roles outsourced abroad or to low-cost parts of the UK and artificial intelligence being used to do mundane tasks which used to fall to trainees.

Since the recession firms have learnt to do more with less.

That there are literally thousands of training contracts up for grabs each year should at least encourage you. The world will always need lawyers and English law remains popular for agreeing contracts and resolving disputes around the world. Good graduates will always have a chance of making it in the profession. But don't go into the law just because you think it's an easy option. It isn't. The days when students could waltz into a top job by being bright, young and perky are over – forever. Recruiters expect applicants to possess the right professional skills, know the firms they are applying to inside out, and have a stash of solid life experiences.

The use of AI is a big trend in the profession at the moment, and in 2017/18 firms ranging from City heavyweights to regional players told us that tech and innovation were a focus. “Technology is at the forefront of what we’re doing to provide a better service to clients, given increasing cost pressures,” a City firm partner told us. The training principal of a insurance-focused firm expanded: “Even 20 years ago you could see matters involved a lot of repetition each time. Now a great deal of that can be automated, leaving only the bespoke service to real lawyers.” The prognosis is that the lawyer's role will be less about drafting and organising processes and more about their judgement, experience and business advice. Read our feature on The law firm of the future (sponsored by Womble Bond Dickinson) for more.

The overall picture for trainee recruitment is this: there are literally thousands of training contracts up for grabs each year and if you have the right qualities and motivation, they are within your grasp. The world will always need lawyers and English law remains popular for agreeing contracts and resolving disputes around the world. Good graduates will always have a chance of making it in the profession. But don't go into the law just because you think it's a straightforward option. It isn't. The days when students could waltz into a top job by being bright, young and perky are over – forever. Recruiters expect applicants to possess the right professional skills, know the firms they are applying to inside out, and have a stash of solid life experiences.

 

Marry me or lose me forever

Law firm mergers are now commonplace. There's a trend towards consolidation in the market, which means there are fewer law firms about. Some have gone into administration: many high-street outfits have ceased operations in the past few years, and some major law firms too have gone dodo-wards. There are still firms out there in financial difficulty, with costs rising and profits plummeting. If you want an idea of which firms are having a rocky time of it have a look at recent revenue and profitability figures (big dips could mean a firm in trouble, though growing revenue is no means of success) and firms with low trainee retention rates

Mergers are much more common though. Half of the firms featured in Chambers Student ten years ago have now either gone bust, undergone a merger or been in merger talks. Law firm mergers happen up and down the market from regional outfits to global heavyweights. Significant mergers of late include Eversheds' long-awaited tie-up with US firm Sutherland; the yuuuge three-way merger between CMS, Olswang and Nabarro; national firm Bond Dickinson shacking up with North Caroline's Womble Carlyle; and the tie-up between City firm BLP and Americans Bryan Cave to create BCLP. Other firms known to have been eyeing mergers include Ince & CoBrowne JacobsonWard Hadaway and Mayer Brown. Even magic circle maestro Allen & Overy is reportedly in merger talks with Californian O'Melveny. Put frankly, there are only a handful of firms in this guide which we'd say are definitely not going to merge in the next few years – Slaughter and May, Macfarlanes and Travers Smith are three.

Half of the firms featured in Chambers Student ten years ago have now either gone bust, undergone a merger or been in merger talks.

Reasons for merging include expanding a firm's practice areas or national presence, growing its international reach, improving referrals, and reducing overhead expenditure on things like property rental, support staff, technology and (yes) trainee numbers. Trainees' contracts are usually honoured when firms merge, but over time merged firms do often cut back trainee and NQ recruitment numbers to below their would-be combined total. For more on this topic read our feature Law firm mergers: why do they happen?

 

Public spending cuts

Unless you've been living in a cave for the past six years, you will have read about the range of public spending austerity measures which have been sweeping the nation. With the Conservatives now forming a majority government most of these cuts are set to continue and deepen. Firms that work for clients in sectors which rely heavily on public funding – healthcare, housing, local government, transport, education, infrastructure, charities – have found some of their work drying up. It remains an open question how these sectors will be affected by the combination of continuing cuts and Brexit.

The public funding of litigation through legal aid is being severely cut.

Meanwhile, the public funding of litigation through legal aid is being severely cut, with the Ministry of Justice aiming to trim the legal aid budget by a quarter. Combined with other funding changes, this is squeezing lawyer fees in areas like crime, housing, family, employment and personal injury.

While larger commercial firms which practise in these areas are not affected (their clients pay privately), the cuts have affected smaller firms significantly. For example, Fisher Meredith, a London firm which previously had a significant legal aid practice, first halved the number of trainees it recruits and cut solicitor numbers; then in 2017 it merged with commercial firm Bishop Sewell, disappearing from the legal landscape.

Reforms brought in by the 2012 Legal Aid, Sentencing and Punishment of Offenders Act have seen whole areas of practice removed from the scope of legal aid (especially in the family, immigration and housing fields) and cuts to legal aid practitioners' fees. In protest, barristers and solicitors have organised strikes and taken to the streets to demonstrate. Various judicial challenges to the manner in which cuts have been implemented were also launched.

In a partial climbdown, the government announced in January 2016 that a new planned tranche of cuts to police station duty solicitor contracts and lawyers' fees is to be shelved. However, the impact of those cuts already in place is significant and will continue to have an effect on the industry: there's been an increase in the number of litigants in person and a decrease in available work for lawyers acting for your average man in the street.   

For more on this topic, take a look at the Solicitors' Practice Areas, and read our feature on Becoming a legal aid lawyer.

 

The Legal Services Act

The Legal Services Act 2007 has now fully come into force. In a nutshell, the Act aims to liberalise the market for legal services: non-solicitors can now become partners in law firms and so-called Alternative Business Structures (ABSs) allow lawyers to team up with other professionals to offer services. ABSs also allow firms to seek external investment. More than 300 ABS licences have been granted so far, with legal services now offered by the Co-op, the AA, Eddie Stobart, Admiral and KPMG.

So far this influx of new legal service providers has not led to a massive upheaval in the way people get their legal advice. Notably,  no supermarkets have so far gained an ABS licence, despite the Act being dubbed 'Tesco law' because it potentially allows legal services to be bought alongside groceries at your local superstore. In part the lack of change is due to existing legal practices adapting well to deregulation and using the new rules to their advantage. National firm Irwin Mitchell is one of the most innovative players on this front, having gained five ABS licences in late 2012. Read our feature on Alternative Business Structures for more.

Many thought Irwin Mitchell would also become the first UK law firm to trade publicly on the stock market, but ultimately that honour went to Gateley  whose June 2015 IPO valued the firm at £100 million. A few other firms have since follows suit and it's rumoured that DWF  could soon become the biggest English law firm to go public.  

 

If I were a rich man

The Law Society's recommended minimum trainee salary as of 1 May 2018 is £21,561 in London and £19,122 outside. This replaces the SRA's previous minimum salary requirement, abolished in summer 2014, which was lower. The Law Society's minimum is only a recommendation though and not enforceable; some trainees earn less. Low salaries mainly affect regional firms and small general practice and legal aid firms. Legal aid cuts have squeezed the incomes of many junior lawyers in this area.

By contrast lawyer salaries at major commercial firms both in and outside London remain generous and continue to go up. In fact at some US law firms' NQ pay is now frankly obscene. It all came about after the big Wall Street firms in New York raised their starting salaries to $180,000 and their London offices followed suit, then this year the big New Yorkers began hitting $190k for new starters. The going rate for an NQ at a top US firm is now £100k or more and several top English firms have responded with their own NQ pay increases. Trainee pay at these firms has been increasing too, and the highest payers (again it's the Americans) will now bung first-years £50,000. Be warned that such high pay comes with very long hours.

For a more detailed analysis of trainee and NQ pay at different types of firms and in different regions read our feature How much do trainee lawyers earn?. For more information on individual firm pay, check out Table of salaries and benefits.

Lawyer salaries at major commercial firms both in and outside London remain generous.

Once you're a trainee you should be well placed for the future. The number of trainees who stay with the firm they trained with varies from employer to employer, but taken together the firms we surveyed in 2018 retained roughly 80% of their trainees upon qualification. There was a noticeable dip in retention in 2009 and 2010, but for the past few years retention has hovered around the 80% mark. The Brexit vote has not had a negative effect on the retention of NQs at commercial firms. It remains to be seen if Brexit itself will have an impact on retention or recruitment numbers. Elsewhere on this website you can find further Retention analysis and Retention stats for every firm we've covered in the True Picture since 2001.

 

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