The UK legal services market is forecast to power out of the recession with annual growth of over four per cent, according to an authoritative study published by the Law Society.
The most comprehensive ever economic study into the legal services market combines published research and new quantitative and qualitative material. It presents a detailed analysis of the global and UK legal markets and forecasts future performance drawing on a wide range of sources.
Law Society chief executive Des Hudson said:
‘The UK legal services market is worth £26.8bn. It employs up to 320,000 people in England and Wales alone and contributes a net £3bn to the UK’s balance of trade. So the health of this sector is vital for wider economic growth and to the Chancellor’s aspirations for fiscal balance. Our study shows that law firms in London and elsewhere in England and Wales are winning an increasing share of a growing global market, bolstered by a strong international reputation and a highly qualified and professional workforce. With regulatory changes permitting increased external investment, some firms are well placed to win an even larger share of this growth.
‘However the study also reveals a tale of two cities. In contrast to the granite and glass offices of the large law firms competing for business from around the world, traditional high street solicitors firms face a less rosy picture. Numbers of these firms have proved remarkably resilient over the last few years, even when their traditional sources of income – conveyancing residential property and representing legal aid funded clients – have halved. The best local firms are fighting to win an increasing share of a smaller market, but not all can succeed in this way.
‘The Law Society is using the wealth of insight and information afforded by this in depth study to plan the services and support we provide to all our members and their firms. It will help in refining the support we provide for major law firms in winning global business, and in continuing to help high street firms adapt to new market conditions.’
Highlights of the study:
- In England and Wales, between 267,000 and 320,000 people work in legal services, in 30,000 firms or other entities;
- Total turnover of these firms is approximately £25.6bn, or 1.48 per cent of GVA (2010 figures);
- Solicitors account for 38-46 per cent of individuals, 44 per cent of entities and 58 per cent of total UK turnover (UK figures) but the role of non-solicitor and non-barristers is significant;
- Total turnover is estimated to have fallen between 2011 and 2012 to £25.4bn (following only a marginal increase between 2010 and 2011) as the economy struggled through a double-dip recession. However, a return to modest growth is expected for UK legal services in 2013, rising slowly to £27.5bn in 2015;
- Longer term growth rates are predicted to exceed a healthy 4.2 per cent from 2015 onwards.
While the turnover forecast model takes into account economic factors, the reports include much broader analysis of a wide range of factors with potential to drive change in the market as well as an assessment of the challenges and opportunities facing providers. These include:
- Changing behaviour of purchasers of legal services stimulated and facilitated by technology and broader demographic changes;
- Globalisation / global and national economic climates;
- Changes to civil litigation and legal aid funding;
- The regulatory environment;
- Technological and process innovation.
Accompanying the study are a range of future scenarios – each anticipating distinct political, economic and market developments, designed to help firms plot their own future business strategy.
Scenarios for the legal services environment in 2025:
The Law is an App describes a highly dynamic, competitive and amorphous world in which only the fittest, and quickest to adapt, survive. The global economy is highly interconnected and global and domestic economic growth is positive and strong. The global legal environment is marked by growth in international rules and institutions and the rise in prominence of private actors and shapers. ‘Leading’ buyers play an active role in shaping the services they want and they are supported in this by strong and active civil society organisations and technological and process advancements. Innovation in the broadest sense has transformed the market.
Wise Counsel is a story in which legal expertise is highly valued and demand for good quality legal services is strong. There has been rapid economic and socio-cultural globalisation resulting in increased complexity but high global and domestic economic growth. In this world, however, the increased internationalisation of law and legal institutions has a distinctly public nature. ‘Receiving’ buyers present very limited stimulus for providers to change and innovation in the market has tended to be enhancing rather than transformational.
The Mini Clubmen uses the metaphor of the mini car to paint a picture of the legal services market: the 2025 mini may not be the classic 1960s car but it is still largely familiar – though, in the case of legal services, actually much smaller. Global markets have levelled out and nation states are now more inward looking and protectionist, coinciding with negative domestic economic growth. The global legal environment is fragmented and the former trend towards expansion of international rules is in reverse. ‘Receiving’ buyers present very limited stimulus for providers to change, and technological and process innovation has enhanced rather than transformed the market.
Bleak House is a world of tension between buyer and provider, in which the outlook for both is bleak. The dream of globalisation is a memory and growth, both globally and nationally, is low. Processes of legal internationalisation are in reverse, leading to a fragmented global legal environment – regional pluralism, and ‘thickened’ legal borders, are rife – and the importance of private legal and governance regimes is on the rise. ‘Leading buyers’ shop around, search for, and use, information, and have high expectations of delivery and service. They are prepared to be actively involved in the resolution of their problems. However, since innovation in the market has been stifled because of the economic conditions, providers are, in general, not well set up to meet the demands of buyers and dissatisfaction is widespread.