Credit crunch blues

The grim reality of doing employment work in a credit crunch is that you are advising a lot of people who are being made redundant. Over the last few weeks I have seen dozens of people who have been made redundant by their organisations and in some cases made quite generous payments in order to ensure that no litigation ensures. From my perspective I am always amazed at how much sometimes quite young people are earning and in some cases in respect of quite low-calibre work. It comes as a shock to me earning a relatively modest salary to see 30-year-olds earning £150,000 plus stock options, plus bonuses, plus really rather nice cars.

Where did I go wrong? Was it that decision to enter the legal aid fraternity rather than a West End corporate law firm? Or is there indeed light at the end of the legal aid tunnel? As someone remarked to me the other day, “Thank God for legal aid, at least the government will always be there to pay us”. Certainly discussing recent events with firms that specialise in conveyancing – firms that are having a really rather horrible time at the moment – it feels nice to see a legal aid client and be paid £50 per hour for the benefit of doing so.

All those empty desks

Having been in the business for quite a few years I have had experience of problems before. Nevertheless, the difficulties we have all experienced over recent months have been far worse than anything that I have seen in the last 30 years – the sheer numbers of people being made redundant, the empty desks in the estate agents, and the absence of conveyancing clients. There is a desperation in the air; clients seem more worried than ever before, and it is fair comment that many people do need good-quality legal advice, especially if they owe money on a mortgage or have rent arrears.

Troublingly, it is probably a fact that most high-street firms do survive on their conveyancing income. When that goes West, while there may be wills and probates to look back to, generally unless you have some litigation on the go you have to look to the bank manager for assistance.

Fortunately, I am doing something like 90 per cent litigation at the moment, which cushions me from the crunch but some of the clients are now getting to the stage where they cannot afford the litigation. They mutter about after-the-event insurance, conditional fees – anything to avoid having to pay the dreaded solicitor’s bill.

Silver lining?

Although some good does come out of the crunch. Firstly, we are seeing HM Customs & Revenue relaxing the rules on payment of tax in January and relaxing the penalties on late payment of VAT. This is extremely welcome news for all firms of solicitors and will give us all a very welcome breather indeed. Let us hope the scheme is a reality rather than government spin.

Secondly, the Legal Services Commission is now thinking at long last of weekly payments. For as long as I can remember payments were on a twice-a-month basis and one never really knew what was likely to be in the bank. Having payments on a weekly basis will be very helpful and I know my bank manager will be very pleased too.

Challenging times ahead

So what other challenges will the New Year provide? There is talk of entirely electronic working in the legal aid sector. To be fair this talk has been going on for some time. Certain legal aid bills are currently dealt with electronically and the word is that all bills will be dealt with electronically by 2010. The problem I foresee is that electronic working at the moment affects very simple and straightforward bills and I suspect that when the system is extended to all matters electronic, it is likely to collapse. Quite what the end result of that will be I cannot speculate upon but I doubt it will be good.

Legal aid lawyers are also being urged to start to work in partnership with the not-for-profit sector. The rather oddly worded Community Legal Advice Network (CCLAN) is an idea that seems never to go away. Those at the LSC seem intent on pushing the idea through, hopefully with the assistance of the local authorities so that all advice funding in a single area is funded jointly by the local authority and the LSC. My bet is that this idea could easily be doomed to failure if rolled out across the whole country. While a few Community Legal Advice Centres (CLACs) have been opened up in slightly unusual areas, my guess is that if a CLAC were opened up in certain areas of London it would lead to firms of solicitors and not-for-profit agencies going bust, choice being restricted and the very simple problem emerging that at the end of any one particular contract there would be nobody else left to bid for it, leaving the contract holder with an effective monopoly. Will that be a good thing? Certainly not for the clients who will undoubtedly be left with an inferior service.

So 2009 holds a number of challenges, but nobody said that running a business was easy. Certainly the Christmas presents that I have received from clients this year have been fewer than ever before and doubtless that is a clear sign of the economic downturn. Fortunately bones are cheap and clients have still recognised that Cosmo the dog needs to eat!