As discussion topics go, preparing for the recession is right there with ante-natal classes; full of scary diagrams and useless advice, except without the beanbags. What's more, you know it's coming and you know it'll be vile, and you know you won't get any sleep for months.
The most recent law firm business confidence survey from The Lawyer and Wheeler Associates shows that more firms are emerging from a state of denial. In our first survey, published last quarter, most law firms expected both fees and profits to rise over the following six months. Three months later, things have already changed. Now, managing partners are less optimistic, with only 51 per cent expecting profits to grow over the next six months. This compares with 72 per cent predicting growth in Q1.
Least optimistic are the largest firms, which are presumably sensitive to the effect of salary rises and have more sophisticated management systems that can track the ebbs and flows of business. This coming year looks bleaker, despite many law firms' year-end results.
There are two intriguing issues raised by the report. The first is that 30 per cent of those surveyed are in merger talks. But is it really a good idea to pull off a merger and all its attendant upheaval just as the economic climate hardens? After all, the only successful mergers of the last recession were led by strongly-managed regional firms such as DLA (this was a time, dear reader, before DLA was – let us consult the script – a City firm with regional offices).
The second issue is implicit. The biggest worry for law firm management teams is that there is a sheltered generation of partners unused to wavering profits and hence unused to the realities of owning a business. The past five years have conditioned them to see nothing but an upward curve. The last recession saw relatively little partner movement, but this time round there will be a lot less loyalty. Fast-growth practices built on lateral hires – and they're not just US firms, by any means – are particularly vulnerable. Even Allen & Overy, Linklaters & Alliance and Slaughter and May – all with plateau partners over a million – are not exempt from worrying. Once you make over a million, dropping back down beneath is going to seem like failure, the poor lambs.
Still, you can count on one thing. Recession or not, the recruiters will still be happy.