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‘Worst of the recession over’ for many UK law firms

Firms now at risk of losing 'talented but disaffected staff' to rivals

20 January 2014

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By Manju Manglani, Editor (@ManjuManglani)

The worst of the recession may now be over for many large to mid-sized UK law firms, a top-25 accountancy firm has said.

Wilkins Kennedy's analysis of Solicitors Regulation Authority data found that there was an overall net increase of 2,795 partnership posts in the year to 30 June 2013 - a sharp reversal of the net loss of 153 partner roles seen in 2011/12.

In addition, 44 per cent fewer posts were terminated through redundancy or retirement compared to the previous year (3,077 partnership posts were closed in 2012/13, down from 5,487 in the previous year).

The figures also show a ten per cent increase in new partnership roles being created, with 5,872 posts being started this year, up from 5,334 the year before. In total, there were 38,740 partners practising at UK law firms in 2012.

Wilkins Kennedy says the data suggests that many law firms are now through the worst of the recession, although problems may still remain at the smaller end of the market.

"Whilst we may not be out of the woods yet with further law firm insolvencies expected, increasing partnership numbers suggests confidence about future revenue growth," said Tommy White, a partner at Wilkins Kennedy.

"Although many firms are still adapting to the more challenging market conditions, this marked fall in apparent 'firing and retiring' of partners at UK law firms is perhaps an indicator that the stop-start restructuring and cost-cutting of the legal sector is now past its worst."

White noted that there is now greater scope for promoting lawyers coming up the ranks. "These statistics suggest that partners that are leaving or retiring are being replaced, rather than their positions being left unfilled. This perhaps indicates that the promotion prospects for the next generation are starting to look healthier."

However, he warned that alternative expectations for lawyers' career progression are starting to emerge following the slow growth that has restricted partnership numbers in recent years. "While the legal profession has always had a well-defined career path with partnership at the pinnacle, now we are seeing signs that attitudes towards what constitutes career success may be beginning to change," he said.

"The progression of many senior associates' careers may have been stalled whilst firms tackle the challenges caused by the credit crunch. Now some of these associates are starting to question whether partnership is really the be-all and end-all for their careers. Some are seeing a salary and bonus arrangement based on their own personal performance as preferable to what can be the much more volatile earnings of a profit-sharing partner."

Continued White: "Firms increasingly need to bear in mind succession planning. They may be able to identify ways to keep partnership numbers at the right level without losing talented but disaffected staff to rival firms, or them moving to in-house roles. This may be achieved for instance by creating new job titles or management roles as an alternative to partnership."

 

 

 

 

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