South East Special Report: Rolling with the crunch
3 February 2009
As elsewhere in the UK, law firms in the South East have not been immune to the changing economic circumstances. But, says Kian Ganz, the region is proving more resilient than others
The South East is still the UK’s second-largest ;regional economic bloc after London, and like the capital it has been hit by the recession.
However, some of the large commercial law firms in the region appear surprisingly hardy, despite a continuing gloomy outlook from most of their managing partners.
While the brunt of the recession seems not yet to have hit the larger South East firms, in the coming financial year the majority will be bracing themselves for the real blow to come.
UK-wide, the South East firms were among the earliest to make significant job cuts (The Lawyer, 22 September 2008), and now there is almost no firm in the region that has not shed staff. Residential conveyancing practices in particular have been scaled down significantly, with corporate work also taking a hit.
At firms such as ASB Law, which has offices in Maidstone and Crawley, the job cuts were only partly the result of the economy as a whole, as the firm continued down the road of realigning its practices – a project it would clearly have been preferable to have undertaken at an earlier time.
Cost-cutting is de rigueur across the region as firms first prepared for and are now waiting to see if the market will turn. Thomas Eggar managing partner Tony Edwards says his firm had reduced its cost base by around £2m over the past year.
“Recruitment costs have dropped dramatically and a lot of our discretionary marketing has also gone out,” says Edwards. “High-cost events and corporate hospitality have been cut down by holding more one-on-one meetings with clients, which is exactly how it should be and actually what clients want too.”
Edwards’ projections for the full financial year (ending in April 2009) are for a drop in turnover of around 5 per cent, although margins are continuing to be squeezed heavily by clients. He is still somewhat reassured by the benefits of lower non-City overheads, though.
DMH Stallard also cut several jobs late last year and managing partner Tim Aspinall hopes that the results for this full financial year, which ends in June, will match last year’s figures. Profits are, of course, likely to suffer, a situation that has not been helped by a pricey move in London to a new office.
On the plus side, London has helped the firm attract more litigation work.
Aspinall says that in the first quarter of the year the litigation department was up by around 40 per cent on the same quarter the previous year.
DMH’s public sector practice is also doing well, recently winning a place on the Treasury Solicitor’s panel. “Years ago I got into it precisely because I thought there would be a downturn and it wouldn’t be affected in the same way,” says Aspinall.
So far the figures bear him out, with turnover holding up well from June to December 2008, with an increase of 12 per cent on the same period last year.
Aspinall, though, is far from feigning optimism. “My own view is that things aren’t going to improve in the economy until the first quarter of 2010 and lawyers are going to be a bit behind the curve,” he says.
“Most lawyers aren’t going to see much improvement until July 2010.”
When the turning point does come, though, he believes the markets and work will come rapidly. To that extent the firm’s strategy has been to not replace employees who leave and, if possible, to soak up surplus capacity elsewhere in the firm.
Kent firm Thomson Snell & Passmore has also been cushioned by its balance of 60 per cent private client and 40 per cent corporate work, although it was also forced to make a small number of redundancies late last year.
The firm’s practice manager Mark Day is still somewhat upbeat. “In this current market we’re unlike a City firm – we’ve got pure private client, clinical injury and negligence work, which to a great extent is unaffected by the economy.”
The other large Kent firm, Cripps Harries Hall, is rare in that it has not yet made any redundancies in the region, despite almost half of its turnover coming through property-related work. A considerable help has been its participation in Lovells’ Mexican Wave arrangement, whereby regional firms pick up the property work that Lovells does not consider core.
Cripps has also been buoyed by winning a place on the Government’s Catalist panel, finding itself on the Crossrail panel next to Eversheds and Wragge & Co and still undertaking considerable work for former housing associations. Managing partner Jonathan Denny hopes the Crossrail instruction in particular could turn out to be very important going forward.
Denny would not be drawn on turnover for the full year, although he claims that the half-year figures, so far are up on the same period last year. He said he would find it a “good achievement” if turnover and profit for the full year remained the same as they were last year, which he hopes will prove possible for the firm.
Nevertheless, he retains a pragmatic pessimism in his outlook. “Officially we went into a recession in late autumn,” he says, “but many law firms were feeling the pain earlier than that. We’re still fine this year, but everyone will feel pain going forward.”