Roll up, roll up

The Law Society's 2010 annual statistics report provides a snapshot of an interesting point in the history of the solicitors' profession.

From October 2011, the legal landscape is likely to change considerably and irrevocably once open to alternative business structures. It also neatly marks a 20-year period of seemingly unprecedented growth. Since 1990 the number of practising certificate holders has increased by 115 per cent from 54,734 to 117,862, and annual admissions have grown by 127 per cent, from 3,729 to 8,408. In the last ten years the number of private practice firms has grown too, but more modestly (around seven per cent).

The figures raise a number of questions. How has the expansion been accommodated? Indeed, what has driven it? And is that level of expansion likely to continue?

The increasing numbers of private practitioners have filled roles generated in a number of ways. All firm-size groups, with the exception of those with five to ten partners, have experienced growth over the past ten years. In particular, the number of super large firms (those with 81 or more partners, largely based in the City of London) increased by 50 per cent in the period.

Mid-sized firms have increased their ratios of assistant solicitors to principals, and so have increased their employee base despite the reduction in the number of mid-sized firms overall. Opportunities have also been provided by the increase in demand of foreign firms for solicitors qualified in England and Wales '“ the number of foreign offices employing PC holders has increased by 17 per cent since 2010.

The number of solicitors working outside of private practice has increased even more dramatically since 1990, by 258 per cent, but employment in commerce and industry stands out as a booming area. In 1990 around four per cent of practising certificate holders were employed in commerce and industry whereas in 2010 the proportion had risen to almost 11 per cent. For all other parts of the employed sector representation as a proportion of all certificate holders remained stable.

The growth in the number of PC holders must, to a large extent, reflect increased demand for legal services from clients '“ and, given the trends, particularly so from business clients '“ and for in-house legal advice. In the short term some areas of provision are more affected than others by business cycles, but in a recession there are winners (employment advice and contract disputes) and losers (conveyancing services and public sector jobs).

Assuming that demand for legal services is relatively constant in the long term, it is unlikely that the volume of 'legal' work in England and Wales will reduce. The issues going forward are more about who provides those services, how and where from?

Recline or fall?

Clearly in some areas (traineeships and admissions) the historical pattern of peaks and troughs more closely reflects changesin economic conditions than, for example, certificate numbers, which appear to have been very robust in the face of recenteconomic pressures. However, the absolute growth in the size of the profession over the last 20 years masks the fact that the statistics for 2010 already show signs of weakening growth.

Between 2009 and 2010, growth in the number of practising certificate holders (two per cent) and private practitioners (two per cent) was well below long-run annual growth for both groups (3.9 per cent and 3.5 per cent respectively). On 31 July 2010, five per cent of certificate holders were not in active employment whereas in 1990 less than one per cent was in the same position.

The number of firms increased by just 0.5 per cent between 2009 and 2010. Since 2000 annual admissions have decreased between two successive years no less than three times and were down in 2010 by 0.1 per cent relative to 2009.

The apparent deceleration could simply be a reflection of current economic conditions, or it could mark the beginning of a contraction in the number of private practitioners at least. Either way, at this particular point in time, history is unlikely to be a good predictor of the future size and shape of the profession, not only because the 2010 figures tell a less optimistic story in places than the long-term trends, but also because the near future promises challenges either unknown, or merely nascent, in the recent past.

The gathering force of globalisation and technological advances make commoditisation of some legal services, and outsourcing and off-shoring of business and legal processes, possible. Clients who are better informed and more sophisticated than they were 20 or ten years ago, and who are riding the momentum of a strong consumer lobby, are already putting pressure on firms to reduce costs, embrace the digital age and demonstrate their value more clearly.

The advent of alternative business structures and any significant changes to legal aid services will put yet more pressure on private practice in particular. For those in government, public spending cuts must have some impact.

The reality then is that the many traditional, existing models of delivering legal services will face considerable challenges, and continued growth of the number of private practitioners, in the medium to long term, would be surprising. Contraction, to some extent, seems likely. The same might have been said ten years ago, and such predictions proved false, but different external forces are at play now.