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Five per cent of fee earners must go to return profession to prosperity, RBS says

19 March 2012

A further five per cent of fee earners “needs to be removed” to return the profession to its former prosperity, a report for RBS has suggested.

The report, by head of UK legal services James Tsolakis, estimated that firms had cut 15 per cent of fee earners and support staff since the recession took hold in 2008.

“It is noteworthy that during 2010/11 restructuring continued through the market, albeit in many cases much less visibly than has been the case previously,” he said.

“The nature and character of the restructuring has changed. When it became a significant but innovative feature of the market in 2008/09, it was normally very deep and often highly visible.”

Tsolakis said restructurings were now “very often less visible and in some cases even invisible to the market” and restructuring initiatives were kept “both very private and discreet”.

Despite everything that had been done to “properly align them with correct activity levels”, Tsolakis said he expected further restructurings in the next few months.

“However, the profitability dynamics of the profession are changing, and it may be that existing levels of fee earners are sustainable, resulting in the dilution of the overall profitability of the profession when analysed over the number of fee earners in the sector.

“It is our view that this will not be an acceptable outcome over time, and the legal sector will commence some stratification or segmentation on profitability grounds, so as to differentiate between high, medium and low-profit firms.”

Tsolakis said the full impact of outsourcing activities was “yet to be realised”.

He said the emergence of ABS in 2012 would have “transformational implications” for the legal profession.

“We are aware of situations that will touch the top end of the market in short order, and have long-term consequences to the organisation and structure of the legal profession in the UK if they transpire as proposed.

“Ultimately, we expect ABS to be the medium through which both the government and the Legal Services Board’s vision for greater access to justice is realised.”