So much for the pressure on pricing. So much for a paradigm shift in the business of law.
Today’s astonishing findings from costs lawyer Jim Diamond (see page 4-5) shed an entirely new, and in some quarters probably not entirely welcome, light on the past couple of years’ trading environment for the UK’s leading lawyers.
The fact that not one magic circle partner was willing to go on the record for a story about a resurgence in law firm pricing smacks of embarrassment at a time when lawyers are supposed to be bending over backwards to accommodate clients. According to Diamond’s annual survey, hourly billing rates at the majority of UK firms are back up where they were before the recession.
Remember that time? It was before the concept of deep discounts was as familiar to top lawyers as it is to bargain-hunters in Matalan. Also, at that time there was less debate about the relevance of the billable hour as a measuring tool.
Law firms’ business model used to be so simple. Sell a few hours for a price. Sell enough hours at a good price and you’ll make money. Keep a lid on costs and you’ll make a decent profit.
Today, as our story highlights, the rise of fixed rates, discounts and alternative fee arrangements has placed a question mark over the reliability of tracking firms’ headline rates. As Macfarlanes managing partner Simon Martin puts it: “The old days of the billable hour are gone.”
Or, as another partner sums up the market’s prevailing attitude to the billable hour’s relevance, “it must have been scrawled on the walls of a cave by Neolithic man”. In fact, archeologists have yet to find any evidence of law firm economics among the prehistoric daubings of animals in Pech Merle, although they do include both bulls and bears. Close enough.
When the number of hours firms were billing fell off a cliff around October 2008 the pricing in most areas became much keener almost overnight.
Diamond’s survey bears this out. Now, hard on the heels of the broadly positive results posted by most UK firms in 2009-10, it looks as if the worst is over - for firms at least. Bouncing back? They’ve bounced.