Wales: changing pace

There is one thing for which the credit crunch cannot be criticised: it is an egalitarian event that does not discriminate between large and small firms. Everybody is getting hit eventually. The Welsh legal services market is no exception and offers an almost classroom example of how firms have been affected and are responding to the downturn '“ but with a specific twist.

The big beasts on the southern coast have greater natural resilience because of their size. The smaller creatures in west and mid Wales, meanwhile, appear more vulnerable, though their comparatively more precarious position could have more to do with the idiosyncrasies of the Welsh market as a whole and their business model just the right one for their time and place.

But for all of them, the credit crisis has been a catalyst to review their strategies and as they are valiantly fighting economic adversity, many are already rolling out plans for beyond the crisis. Take Leo Abse Cohen, for instance, the 12-partner firm based in Cardiff, with branches in Swansea and Newport, whose roots are in the trade union market.

Trade union work remains the firm's main focus and it has experienced a small downturn in certain parts of the market as the traditional manufacturing and engineering industries have seen a lot of redundancies, resulting in fewer members and therefore fewer potential clients. Other sectors however, such as shop workers and council workers unions, have remained relatively unaffected.

'Providing advice to trade union members is a specific service, ranging from personal injury and employment to family, wills and property law. It's a service not all firms can afford to provide; small firms usually don't have the capability,' says Richard Norman, the partner heading the personal injury department.

With this capability in place, the firm is now looking to expand outside the trade union market.

Extending capability to new markets

'We don't want to be over-dependent on trade union work and 18 months ago we started developing our presence in the business market, where we are now offering litigation and property services,' Norman continues. 'Non-trade union work now represents nearly 40 per cent of our turnover.'

'We are also trying to develop our clinical negligence offering, particularly where cases are funded through legal aid, where lawyers are still eligible for payment '“ albeit at a lower rate '“ if the case fails.'

Dolmans, another Cardiff-based firm, has traditionally targeted the public sector and acts for several local authorities, police forces and fire brigades in Wales. Like Leo Abse, Dolmans' work originally centred on personal injury work (on the defendant side) but it has gradually moved to more general litigation and commercial work, employment advice, and has grown a private client department offering estate planning and wills and probate services.

Justin Harris, a partner and board member, recently led a team providing advice to the City and County of Swansea involving the creation of a not-for-profit leisure trust to manage and operate the council's newly refurbished leisure centre.

As many other firms with a litigation department, Dolmans has seen a rise in claims '“ not just personal injury claims and not just court-based work. The firm has a claims-handling service, which, Harris says, gives it a broader perspective on the claims process generally, not just litigation, 'and there has been an increase in the number of claims being made'.

And national firm Morgan Cole, which has large offices in Cardiff and Swansea, has also been leaning on its core market, contributing to the firm's six per cent growth this year.

'We have always aimed to be present in all areas but we're particularly strong on the contentious side, with a distinct leaning on the public sector,' says managing partner Elizabeth Carr. 'This year our institutional client base '“ including insurance client in particular '“ has helped us to balance our revenue, particularly in Wales.'

Looking ahead, the firm is already beefing up its insurance practice. It recently acquired a specialist insurance firm in Bristol on which it intends to consolidate its service for the wider region.

Move west to Swansea and the proposition begins to change slightly.

Go west

Steve Penny, managing partner of 20-partner John Collins Solicitors, says his firm's strategy to remain a full-service practice has been salutary in the current climate. With 100 staff and a total of 40 fee earners, the firm is a large player but has been keen to continue to nurture a dual private client and commercial client basis.

While property work has reduced family and agricultural work has grown; and on the commercial side, debt recovery and litigation have increased significantly.

'We had to review the plans we made before the recession but we've had a good year and turnover was up,' says Penny, according to whom one of the main lessons of the recession is that firms cannot take year on year growth for granted.

Meanwhile, at five-partner firm Morris Roberts in Carmarthen, managing partner John Lewis says the firm has been affected by the drop in residential property but that other areas had held up well.

'Commercial property, in particular, has held up, with retail clients still active and public-sector or energy-related projects such as wind farms continuing to provide a good source of work,' he says.

The firm even took on an experienced property executive with a good following of small developers who Lewis expects to become more active again as the economic climate improves and will place the firm in a good position on the market.

In line with the general trend, Lewis also says his firm has received a lot more enquiries in employment law, with people facing redundancies or dismissal, as well as in general litigation and debt recovery '“ 'where before the recession people may have been able to sort things out by themselves they are now turning to litigation'.

The firm is also still part of the Welsh Injury Network, a grouping of nine firms who share an advertising budget and a personal injury claims dispatch centre where clients are allocated to one of the participating firms on a geographical basis.

But as one moves away from the south coast it is not just the physical landscape that changes; the legal landscape is taking a different shape too which could be set to evolve further in the next few years.

Size matters

For Lewis, growing the firm must inevitably form part of the plan and the partners are keeping an eye out for potential acquisitions or merger. 'Unless you're a niche practice in some way, you have to have an optimum size and be able to provide an all round service,' he says. Optimum does not necessarily mean very large, just enough to offer all key services, but otherwise, he continues, 'there are plenty of predators out there ready to take your clients'.

In fact, even in Swansea, John Collins' Steve Penny says that although the current circumstances are not ideal, the firm is actively considering growth through acquisition or merger.

But the question of size is perhaps even more relevant for firms in mid Wales. As population density falls and clients are a lot further apart, viability is a more immediate issue.

'There is pressure to merge,' says Robert Hanratty, managing partner at Hanratty & Co, in Newtown, who cites the takeover last month by prominent local firm Harrisons of the smaller Flanagan & Jones.

The firm, which provides a mixture of privately funded and legal aid work, only does a small amount of conveyancing and has few business clients, and has been spared the worst of the downturn. So far it has not had any reason to consider merging but Hanratty acknowledges the inherent difficulties in Powys as the largest county in Wales but also the most sparsely populated in the whole of the UK.

Low population density in the region has had an effect on the availability of legal aid. 'The number of firms offering legal aid in Wales has fallen dramatically,' Hanratty says. 'While Newtown is reasonably well served with three firms, a town with a like catchment area like Aberystwyth only has one.'

And while there have been mergers in rural areas, Hanratty says it still leaves large parts of the region covered by only one firm, with all the implications on essential features of the legal aid system such as effective and timely delivery of service and peer review.

The main problem that remains, however, is that a low population means less activity and fewer opportunities for law firms. 'There is simply not enough crime to keep a two-lawyer firm busy week in week out,' he says.

What is a firm like his to do then? 'You have to remain generalist and maintain the level of expertise across all main practice areas '“ but if you can pitch it at the right level, it is a business model that can work.'

Career development prospects can be equally limited. An advocate for over ten years, Hanratty has considered getting higher rights of audience but, in the absence of higher courts in the region, what would be the point?

His biggest frustration though is with the general lack of funding in court facilities and the resulting issues in relation to access to justice.

'In a lot of rural areas there is a feeling that justice is being centralised away from the people concerned in large urban centres,' he says. 'The Upper Severn valley, for instance, is heavily populated but is classified as a less populated rural area for the purposes of the administration of justice, which is ill-founded.'

Even basic projects aimed at bringing justice closer to the citizens seem to be stuck in dead ends. The site acquired in Newtown about 25 years ago for a new justice centre has remained undeveloped. Aberystwyth was also due to have a new court but that appears to have been shelved too.

'There is a real need to build essential facilities in central Wales,' says Hanratty. 'The good news is now that we have our own circuit, things might start to look a bit different, but it's likely to take time before we see noticeable improvement.'

But for all this, Hanratty remains convinced that being a lawyer in a rural Welsh practice can be as rewarding as one in an urban area. Lawyers tend to be more involved in the local community and the pay is often comparable. 'It's difficult to get the message across but younger lawyers are now more interested and new trainees are coming in with the right skills,' he says. 'The problem is for older partners, who must work on an exit strategy other than death.'

For now though, the more imminent threat of the Legal Services Act is what is on the minds of many.

Ready for the next round

Back in Cardiff, Leo Abse Cohen's Richard Norman says solicitors should be confident they can offer a credible alternative to 'Tesco firms' though they will have to work at it. 'Solicitors need to be able to show the public that they are more than just able solicitors, that they have the knowledge and the same customer focus, service standards and speed of action as the large retailers.'

He continues: 'The overall service to client has to be better than the one offered by large faceless organisations.' Accordingly, the firm has developed a cost-effective case management system to ensure that cases go through quickly and that the quality is of an expected standard, which involves skilled case-workers carrying out a primary filtering of new cases before handing over final decisions to a partner committee.

While in Swansea, John Collins's Steve Penny says his firm has strategically moved away from the personal injury small claims market to focus on complex cases and clinical negligence. It is also a founding member of The Legal Alliance, a network of independent firms working with established national brands to deliver services locally.

In the meantime, though, firms are focusing on the more urgent job of facing the downturn. Fewer parties and more targeted marketing are the order of the day. They have worked through what analysts now regard as the toughest part of the recession, so as long as firms carry on with their focused approach and caution, they should not have much longer to wait before they are on a straight run once again.