“Einstein once claimed that he never thought about the future because it came quick enough. Those who run businesses don’t always have that luxury, but he was right in the sense that the key factors that will influence how the world will look in five years usually already exist. The challenge is to identify them and to seize the opportunities they create.
This is especially true for the UK legal market. For firms focused on private clients, fundamental changes to legal aid and personal accident claim rules, together with new technology solutions and services, will reshape large swathes of their market. Firms serving business will face increased market volatility, excess capacity, ever-more sophisticated purchasers of services and a wider range of market entrants. Against this background, what will we see?
Business models will adapt and there will need to be more differentiation to stand out.
Over the next five years: a small number of ‘bet-the -bank’ work firms will thrive; specialist firms that offer focused expertise will do well; firms providing technology- driven options in commoditised products will have a chance to grab market share; truly integrated international law firms will offer business a solution to the challenges of increased globalisation.
In addition, geographic expansion will continue [and] law firms are relatively new entrants in the global race and remain quite parochial. This will change as firms internationalise, consolidating in the process. This will not just be the UK- and US-based firms. Firms from other places will also expand, for example: Chinese firms globally; Spanish firms into Latin America; and Japanese firms into Asia.
Professionalisation of law firm management will increase as new types of business enter the market. This will need a shift in culture so non‑lawyers are valued more highly.
Keeping balance sheets strong will be important. With a drop‑off in growth rates, firms cannot count on increasing cashflow (or borrowings) to fund investment. More capital will be needed.
Charging structures will evolve. UK firms will respond to client demand for different charging models, taking more pricing risk themselves.
The traditional path to becoming a qualified lawyer will change as clients become less willing to pay for lawyers learning on the job.
Project management skills will be in greater demand. More sophistication will be required in the way UK firms handle matters, involving more non‑lawyer project managers to ensure process efficiency.
Firms will have to spend more time and money on their own risk management systems and controls, not least to meet increasing client demand in this area.
The use of technology will increase. Firms will have to invest more in technological solutions, from day-to-day systems improvements
through to the much more exciting, if more frightening, next-generation technology that starts to replicate the human mind and thought process.
And over the next 10 years:
London will still be the place where every law firm with global ambitions will need to have a presence.
One existing Swiss Verein structure merger will have collapsed.
One Top 50 UK law firm will sell itself for cash or do an IPO.
David Morley, Allen & Overy