Trends affecting the legal profession

European Commission flags

In a competitive recruitment market where the standards keep getting higher, it pays to know your stuff. Here’s an introduction to some of the main issues on the minds of today’s lawyers.

Brexit stage left

At the time of writing, we’ve hit a crunch period for the Brexit process – by the time you’re reading this, Britain will either have left the EU with no deal or agreed to kick the can down the road with another extension or even the revocation of Article 50. For business, the uncertainty surrounding Brexit remains a barrier to investment and stability, though many are now operating on the premise that a no-deal scenario is the most likely. For sectors dealing with physical assets such as automotive production, this could spell disaster, as concerns over the impact of tariffs and supply chains raise alarm bells about the future of industry. The potential impact of a no deal Brexit on the legal industry is more difficult to measure. According to Orchard Reports research, legal services as an industry was valued at £35.1 billion in 2018, representing a 6.3% increase on the previous year despite the impending threat of Brexit.

The potential impact of a no deal Brexit on the legal industry is difficult to measure.

US firms appear to be faring particularly well, perhaps because their practice is less dependent on EU-UK relations. Latham & Watkins, White & Case and Kirkland & Ellis, the three biggest US presences in the City, all reported double-digit growth in London and many more players from across the Atlantic have set their eyes on Britain’s capital as a market for future growth. That said, UK-born giants like Ashurst, Linklaters and Freshfields also posted healthy returns for the most recent financial year. Many firms have benefitted from increased demand for advisory work as clients seek to anticipate the implications of no deal, a trend that’s likely to continue as the results of Brexit reveal themselves.

- Harry Cerasale

Brexit commercial awareness primers:

How firms are responding to Brexit
Brexit effects by practice area

Salary wars

Speaking of American firms, the Transatlantic titans have had a major disruptive effect on salaries in the London legal universe, setting the market standard for associates closer to mind-boggling levels that are par the course in New York. Since 2016, NQ salaries among firms in the UK have increased by a 6% on average year-on-year. In response to the vanguard action by US firms, the magic circle all joined the six-figure club over the course of the spring of 2019; NQs at other big City players like Herbert Smith Freehills can now also expect a six-figure compensation package.

There’s some smoke and mirrors going on here, as the ‘total compensation’ offered by some firms may include a discretionary bonus. US firms are still undeniably leading the charge regardless. Kirkland & Ellis and Akin Gump NQs top the tree as the highest-paid in the city – salaries at these firms are pegged to the dollar and start at $190,000. Such figures send a message about the sorts of hours associates are expected to work (spoiler alert: they’re long). These salary jumps at the top end may also start to impact salaries at mid-market City firms in the coming years; what’s more, firms with offices both in and outside London will need to seriously consider how to balance attracting top talent in the capital with keeping associates in the regions happy. Mo money, mo problems indeed.

- Leah Henderson

Four’s a crowd

A new challenge to the legal elite’s supremacy has emerged over the last few years. PwC employs 3,600 lawyers worldwide – that’s more than Allen & Overy, Kirkland or Skadden. Deloitte employs 2,400 lawyers; EY and KPMG both hire lawyers in over 70 jurisdictions. These are not law firms, but the ‘Big Four’: professional services bruisers best known for accounting and referred to as ‘bean counters’ by Private Eye. Ever since the 2007 Legal Services Act liberalised the market, these four have lingered as a considerable threat to the current status quo (alongside the charge of so-called Alternative Legal Services Providers like Axiom).

As of November 2019, solicitors will be able to give legal advice on a freelance basis.

Think about it: if a huge company can use a one-stop-shop to get its accounts sorted, deals closed, cases settled and generally receive slick multi-disciplinary business advice, that has to be an attractive proposition. The Big Four have other things going for them too: their global footprint leaves most law firms eating dust. It’s the same with tech: many lawyers still contend with outdated IT systems, and their firms’ use of AI only scratches the surface of what’s available. Its different for the Big Four who are already putting legal tech at the forefront of their offering. But there is one huge factor standing in their way: the specialist expertise of law firms. Alternative Legal Service Providers gain much of their work by being more cost efficient on the more pedestrian legal tasks and for the most high-stakes matters, the best law firms still have a clear edge.

- Thomas Lewis

Just uber it?

Some lawyers may not need to join a firm at all, following what’s been described as the potential ‘uberisation’ of legal services. No, lawyers aren’t going to start driving drunken partygoers around – the SRA has confirmed that as of November 2019, solicitors will be able to give legal advice on a freelance basis. They won’t have to register as a sole practitioner, won’t have to practice as part of a wider firm and won’t have to work as in-house counsel. Instead, they will be allowed to generate their own work and be subject to less rigorous regulation than ‘normal’ solicitors.

The plan has been met with dismay by many who’ve cited potential problems with regulation – the Law Society described the idea of freelance solicitors as a ‘Wild West’ model. Although anyone working ‘freelance’ will have to buy professional indemnity insurance, it’s true that they will not need the same level of cover that is required by lawyers practicing in a firm or in-house. They will have to explain the limits of their insurance to clients, but critics believe that most won’t fully understand the differences. Over to the case for the defence – one of the cited benefits of the change is the potential to broaden diversity in the legal profession by allowing prospective lawyers from non-traditional backgrounds to carve their own path.

- Rhia Lyon

Bring it all background

Calculators at the ready, it’s stat time. In 2019 we conducted a study of 2,500 trainees from across the country; looking back over the past nine years we examined the trends of where trainees at top firms did their undergraduate degrees. We found that law firms’ appetite for Oxbridge and Russell Group students has remained pretty much constant – those universities supplied 76.5% of trainees in 2016-2018. Sounds like a big share of the pie, and it is, but it’s actually down 5% from our survey of the years 2013-2015. Over nine years we’ve witnessed a 3% overall drop in the Russell Group’s dominance.

Diving deeper into the data, we found that 18% of trainees in London were non-Russell Group, whereas outside the capital that figure rises to 36%. Moreover, in three years the number of Oxbridge grads taken on by City firms has dipped by 2.5%. When it comes to undergrad subject, there’s a difference in average earnings between law and non-law grads. The average NQ salary for non-law students is £72,551, 6% higher than the average NQ salary earned by law grads: £68,406. This might reassure the non-law grads out there that they’re not starting their careers on the back foot.

- Sal Francis Morton

The number of female trainees now resembles the actual number of women entering law school.

Di-versity hard

While we’re on the subject of diversity, another year has gone and we’re slowly inching closer to better gender, ethnic, LGBTQ and disability representation in the legal industry. For instance, the number of female trainees now resembles the actual number of women entering law school, and the percentage of female partners hit a record of 36% at non-City London firms and 27% across the country in our most recent industry assessment. ‘The 30% Club’ – a group of major firms that set the goal of reaching 30% women partners by 2020 – are still mostly some way off hitting their target, however. The large majority will miss the 30% mark, which probably indicates that the goal was too aspirational, but we definitely shouldn’t knock them for trying.

This scheme and others have ensured that numbers continue to head in the right direction and results have backed up what we already knew: the legal industry is slow to change, but the change is happening. On a less positive note, 2018 saw a drop in the number of ethnic minority trainees compared to 2016. We’d hazard a guess that Brexit has something to do with this – with no breakthrough in negotiations over the last few years, the uncertainty is likely playing some role in candidates decision to apply (or not to apply) for roles at UK firms.

- Natalie Bertram

Aid buy that for a dollar

Over the last decade, annual legal aid expenditure in the UK has fallen by £950 million, or 38%, in real terms. The result is that half of all not-for-profit legal advice services and law centres in Wales and England have closed since 2013. Good news is at hand, though – as the funding in the public sector has collapsed, the private sector (i.e. law firms) has stepped up its pro bono offering to fill the gap.

“There’s a huge focus on pro bono work here.”

Whether this is a response to government cuts; or due to the greater importance placed on pro bono work by the many US law firms entering the UK market; or simply an increasing level of corporate social responsibility among millennials, is hard to tell. Whatever the reason, pro bono is gaining traction and many firms have forged relationships with organisations such as community legal advice centres. A trainee at one firm noted that “there’s a huge focus on pro bono work here. We’re really encouraged to be involved, from the top down.” One US firm requires all its lawyers, including in the UK, to complete a certain number of pro bono hours a year in order to be eligible for their bonus. Kingsley Napley mandates its trainees do some pro bono in order to fulfil contentious training requirements for the SRA.

- Nikolai Viedge

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 – one of this group of elite firms, KWM, even went bust in Europe! 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.

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.

Tech me out

Artificial intelligence is no longer a science fiction pipe dream – the SRA suggests that AI has the potential to increase business efficiency for both law firms and their clients. Reports estimate that it could create 14.9 million new jobs in the UK by 2027 and add £630 billion to the economy by 2035. Clearly, now is as good a time as any to jump on board the tech bandwagon. Top firms are definitely feeling the pressure to adopt AI in order to work faster and more cost-effectively: 40 of the 100 biggest UK firms were already using AI systems by the end of 2017 and around 30 more had piloted platforms.

We asked a City firm partner for the tech tea: “AI will help lawyers perform their tasks, but it won’t be replacing them. If a client comes to us and needs work on a restructuring matter or a corporate transaction, the human part of our service is still critical in finding solutions that work for that particular client in that instance. Firms need to look at the individual project and implement AI on a case-by-case basis.” One of the biggest potential advantages of AI is its ability to quickly and efficiently complete the menial tasks which many trainees grow to loathe, potentially freeing them up to get more useful experience during their training contract.

- Ayesha Hayat

Merger splurgers

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. 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. 

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

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; the tie-up between City firm BLP and Americans Bryan Cave to create BCLP; a Canadian-British union to form Gowling WLG; and Penningtons Manches' absorption of Thomas Cooper to form Penningtons Manches Cooper. Even magic circle maestro Allen & Overy is reportedly in merger talks with Californian O'Melveny.

It's environment to be

Perhaps the single largest threat hovering over the legal industry – and indeed, life on Earth today – is the burgeoning climate crisis. Failure to tackle global warming will reshape the nature of work in various practice areas within the law. Climate change litigation will increasingly affect both public and private law; traditional oil and gas work will shift in importance as more sustainable energy resources are sought out, a trend that’s already underway now; ecocide is discussed as a means to legally render companies culpable for damages done to ecosystems; and new structures emerge – such as the Nansen Initiative – which seek to provide legal protection for refugees fleeing inhospitable conditions and disasters caused by the changing climate.

As the law becomes increasingly globalised, so the legal industry must become more conscious of the potential effects of climate change on a planet-wide scale. Law firms are also having to adapt on a more basic level, moving towards paperless offices and thinking of new ways to make their everyday practice more sustainable. The biggest changes will of course take place on a society-challenging scale as governments adapt to the impending disaster through legislation. Lawyers will queue up to tell you that change means more work for them, and a changing climate is no exception.

- Joel Poultney

SQEasy does it?

Finally, another topic with major consequences that’s unquestionably a result of human activity. The impending introduction of the Solicitor’s Qualifying Exam – currently set for autumn 2021, though the implementation date’s been pushed back previously – is one of the biggest shakeups to the legal profession in recent history. No longer will aspiring lawyers need to claw through the LPC (and GDL if they’re a non-law grad) before tackling a two-year training contract. In future, any Tom, Dick or Harriet can pass two tests and do 24 months of legal work experience, potentially with multiple different employers, and then qualify as a solicitor.

Sounds peachy – what’s the catch? While the SRA argues that the plans will help speed up the diversification of the legal progression, firms have argued that candidates may be able to slip through the process without the skills necessary for actually doing the job of a solicitor. There have also been concerns that proposed plans to reduce costs for prospective solicitors may come to naught, as they’ll likely have to complete an SQE prep course before actually siting the exam; and that unprepared applicants may show up to the tests having already forked out a wad of cash, with no real prospect of passing.

- Michael Bird

Treat this info as a starting point for further research on the Chambers Student website and beyond. Take what you learn and use it when making applications – some of these topics might well come up at interview.

Your next step
>>> How suitable are you and what are recruiters looking for
>>> Law School