Square Mile

The national law firm – one with at least three geographically diverse offices – is a dog that has had its day.

Look at the history. Until the early 1990s there were only a few of them. The top firms were City outfits that served the whole country or single-office regional practices with local clients and local aspirations. Firms started getting into increasingly competitive markets and began to grow faster than the markets themselves.

Then came the recession. Firms replicated their markets geographically, opening offices in other regions – even London. By opening enough offices they could cover the country and in theory that meant gaining market share.

But what an expensive strategy – in terms of overheads – because of the duplication of administration and back-up resources, and in terms of management time. The head of one national firm told me he did 70,000 miles a year. That's about 1,500 hours on the motorway rather than at the coalface.

And it was expensive in terms of service delivery. It's hard to get a lawyer in Yorkshire, one in East Anglia and another in the South West to give anything resembling the seamless service that corporate clients tell us they want. In one successful beauty parade debrief, the client told us his reasons for not selecting the national firm. Its team had talked about delivering a seamless service, yet he had spotted two team members introducing themselves in the reception.

And it was expensive in cultural terms. It's hard to develop a shared culture if your people have never met.

But the real killer for national firms is that very few big-ticket clients actually want geographical spread – especially for their big ticket work. From our market research, the message is clear: legal services are not audits.

All the evidence points to the fact that the majority of buyers want to buy from one centre, as proved by the success of top City firms. Geographical proximity is not the issue.

National firms have only succeeded thus far because they have three things going for them: the skills of their people, near-monopolies in some great niche products and the complacency and poor cost controls at many City firms. Well, these are disappearing. While the skilled people may stay – at least for now – the niches are getting competitive, and complacency and poor cost controls are being driven out of the better-managed City practices.

Some national firms have already abandoned new office openings and could yet dump some of their more remote outposts. There could be a trend to turn regional offices into distinct, almost self-sufficient, niche practices, a kind of demerger of the hydra they have created.

It's a model that makes sense. But, in the meantime, major corporate clients may drift away to a dozen or so City firms, plus a handful of regionals providing a seamless, client-focused service – probably from a single location.