With our feet now firmly under the table of 2023, what does the year ahead hold for businesses – and for law firms in particular?
For the wider economy, the messages so far have been mixed. Figures released two weeks ago suggested that – whatever else you might say about the 2022 World Cup – its positive effect on UK pub takings may have narrowly saved the UK from going into recession at the end of last year. I’ll drink to that.
Meanwhile Bank of England governor Andrew Bailey had some positive news last week, predicting that the UK may have ‘turned a corner’ on rising inflation, and might face an ‘easier path’ out of recession than previously thought. And if the UK does indeed fall into recession, it is expected to be ‘long and shallow’.
But on the glass-half-empty side of things, last week’s figures from the Office for National Statistics showed there were 1,964 registered company insolvencies in December last year. That’s 32% more than at the same time in 2021, and 76% higher than before the pandemic, in December 2019. Meanwhile further ONS figures revealed that retail sales are in decline, having fallen by 3% between 2021 and 2022 – the biggest drop since ONS records began in 1997.
So what does all this mean for law firms? The first point to note is that businesses in the legal sector are generally in very good shape. When Covid hit in 2022, the legal industry had a brief moment of panic. Then it rallied, and flung itself enthusiastically into the arms of remote working. Within months, the sector was up and running again – and for the large part, as busy as ever.
The pandemic has left the legal industry not only financially strong, but also more tech savvy, more efficient, and with its lawyers now working in a hybrid way that can do wonders for their work / life balance. So right now, law firms are fighting fit to deal with any recession headed their way.
If and when the economic picture does indeed turn gloomy, legal firms can expect a fall in ‘transactional’ work such as corporate and commercial property. But if the lessons of the past are anything to go by, this will be balanced by a rise in the counter-cyclical areas such as litigation and restructuring. Firms will be reluctant to let go of staff, knowing how hard it can be to hire them back when the economy reboots. So instead, they will be keen to re-train and re-skill their fee-earners, moving them into the busier areas of practice.
And there are some practice areas where the work is always there, regardless of the vagaries of the UK economy. Family and matrimonial are two such ‘neutral’ areas. Another one, sadly, is probate. Unfortunately, the grim reaper is one worker in the UK who will not be going on strike in 2023.
January 24, 2023
Insights
