United they stand…

The growth of regional commercial hubs in the South East could threaten the traditional high street law firm – only the strong and adaptable will survive, says Gregory Burgess

United they stand…
While the much-heralded reforms of the Legal Services Act might be responsible for consolidation in the marketplace, it could be argued that the impact of the Clementi review is serving only to accelerate many changes that were already underway in a number of regional law firms.

It is also partly due to Sir David Clementi that the days of some high street law firms appear to be numbered and there is no doubt that the market for legal services is going to change significantly in the coming years. Arguably only genuinely progressive firms will survive.

One clear indicator of change among South East professional services firms is the tendency to adopt a more regionalised approach to their strategic drive for growth. A number of firms have consolidated their office networks to concentrate their skills and resources under far fewer roofs.

Within the South East this has led to a focus on a more limited number of commercial hubs, sometimes to the detriment of business activity in the region’s smaller towns.

There is no better example of this than in the Crawley and Gatwick conurbation. Due to a substantial influx of businesses in recent years, the area, which geographically covers just 2 per cent of the county, now accounts for a staggering 37 per cent of the business rates for the whole of West Sussex. By contrast, the affluent market town of Horsham just seven miles down the road, has an estimated 150,000sq ft of empty office space.

In Kent, Maidstone is seen as the key commercial centre, with Guildford and Southampton performing similar roles in Surrey and Hampshire respectively.

The trend towards the adoption of regional hubs is also reflected in the accountancy sector, with three of the “Big Four” now having their South East regional centres in the Gatwick area. Last year saw BDO Stoy Hayward close its Bromley office and move to Gatwick, with further consolidation planned in Guildford and Epsom. At the same time, most, if not all, the principal banks have a Gatwick presence. To realise the opportunities this geographical consolidation offers firms, mutually beneficial relationships need to be formed within these expanding business communities.

As the quality of the South East’s legal marketplace continues to grow, larger businesses in the region no longer need to go to London to get high-quality legal advice. Firms find themselves in a strong position to compete with the City by offering the same level of technical expertise at a fraction of the cost. And with big-ticket experience, they are also able to target London work from afar with more confidence and, ultimately, greater success.

The other advantage of the trend towards consolidation of resources into regional centres is the development of a greater team ethic and the opportunity for cross-selling.

By having a broader range of legal disciplines under the same roof, departments will inevitably work more cohesively to ensure they are able to offer senior executives advice in relation to both their business and personal legal affairs.

Equally important is the need to create an environment that encourages and fosters cross-selling between commercial departments. Although technology may have seemingly dismantled the barriers once created by geography, in practice, this is not always the case. Out of sight, out of mind is a truism and while it may seem simplistic, collaboration between a multidisciplined law firm’s departments is far more likely if they share the same physical environment and are in regular face-to-face contact.

It also makes sense that as prospective clients and their advisers consolidate in regional hubs, the law firms that wish to service them should adopt a similar approach. A regional firm being able to offer a comprehensive legal service to its clients from one site is now a reality.

While the South East’s legal market is undoubtedly a very competitive place, the larger firms should be well positioned to exploit the considerable opportunities that exist for sustained growth as long as they are agile enough and have the strategic vision to adapt to a fast-changing business world.

Gregory Burgess is an employment partner at ASB Law