Bellwether Report 2022: revenue is up but recruitment and retention remains a challenge
Almost 50 per cent of respondents said firms are insisting teams come into the office five days a week
LexisNexis Legal & Professional has released the 10th Anniversary edition of the Bellwether Report 2022, an annual survey of independent law firms throughout England and Wales.
The survey of 345 small firms and solo legal professionals was conducted in March this year. The report, entitled ‘Transformation troubles’, suggests firms are starting to feel the benefit of tough decisions made during the peak of the pandemic.
Business confidence has returned to pre-pandemic levels – 91 per cent of respondents were ‘quite confident’ or ‘very confident’ about the future of their firms.
33 per cent noted they had outperformed revenue expectations and maintained revenues as against 2021. Four-fifths of firms said their financial expectations had been met – though 23 per cent said the impact of the pandemic on 2021 financial predictions was ‘somewhat higher’, and 10 per cent said ‘significantly higher’ than projected.
However, external pressures continue to challenge profitability. Salaries (56 per cent) and professional indemnity insurance (PII) (43 per cent) have been the most significant operational costs for small law firms in the last 12 months. 81 per cent of respondents, with knowledge of their PII, reported costs increases at renewal. 34 per cent also reported their technology spend had been high.
While there remains a clear desire to grow organically, the number of firms actively open to a merger or acquisition has risen almost 10 per cent since 2021. Just over half (51 per cent) of respondents stated they were growing – a notable decrease from the 66 per cent in 2021 and 57 per cent in 2019.
As in many other sectors, the ‘great resignation’ has had an impact. Around 50 per cent of contributors reported recruitment and retention as one of their top three challenges, with considerable unease that they could compete effectively for talent.
A change in attitude to work-life balance continue to pervade. When asked what they’d look for in a new role, work-life balance was ranked as the most important factor by respondents (45 per cent) followed by firm reputation (31 per cent).
71 per cent of respondents revealed that their law firm has adapted well or very well to the challenges of hybrid working; though it was reported almost 50 per cent are insisting their teams come into the office five days a week, which echoes the growing trend of workplaces calling for workers to return to ‘normal’.
Firms have invested in cloud-based tech to drive greater efficiencies and win more business. 36 per cent had increased their investment in technology and 24 per cent were planning to do so. When asked which tech tools are currently in place, unsurprisingly, teleconferencing software such as Microsoft Teams had the highest adoption rate at 79 per cent, followed by legal research tools such as LexisNexis at 69 per cent.
47 per cent of firms said they had no plans to invest in any technology at all, while 74 per cent admitted they use Google for free research and guidance – even though 63 per cent of the survey acknowledged this was riskier and slower than using legal tech.
There appears to be a divide among firms in terms of business generation and social media. Only 46 per cent said they are set to invest in marketing and just over half (55 per cent) are developing a social media strategy. While over half of survey respondents reported the most effective method of generating leads is through referrals.
Rakhee Patel, senior marketing manager and the report’s author, commented: “It is wonderful to see that the industry has found its feet again after such a challenging period. But with continued challenges with recruitment and business generation, firms must be open to embracing new technologies so that they can survive, grow and thrive.”