Yorkshire: the proof will be in the pudding

Yorkshire pudding, Yorkshire tea, Yorkshire terrier '“ there is little doubt, looking at the imagery used on the website of Sheffield-based Wake Smith & Tofields that this is a proud Yorkshire firm. It reflects our values, says managing partner John Baddeley, and clients like it too. 'We deal with a lot straight-talking Yorkshire clients who call a spade a spade, so it makes sense for to be straightforward about our Yorkshire roots too,' he says.

The firm has retained a broad practice from private client to commercial work, as well as a legal aid franchise for medical negligence, and this has helped it cope with a tough year. While conveyancing work collapsed, commercial litigation grew by 15 per cent.

But there is one thing the recession has been good for. Baddeley, like many of his counterparts in other parts of Britain, says it has forced the firm to take a harder look at its cost base.

'We merged with two firms in the past three years,' he says. 'Initially we didn't look too closely at the cost base but with the downturn we've had to take a tougher approach, for instance by avoiding duplication.'

One-off expenses are also being postponed. 'We would like to bring everybody under one roof instead of running three separate offices but there would be an immediate cost, which we would rather not incur at the moment.'

Up the road in Rotherham, nine-partner firm Oxley & Coward has kept to a similar full-service strategy, even retaining a criminal legal aid department.

Set up in 1791, the firm has had a loyal following of clients, but commercial partner Rebecca Stopford says it cannot be complacent.

'It's easy for somebody to be turned in the current climate; and local firms do a lot of courting,' she says. In response, the firm offers competitive rates, even to clients who it doesn't believe may be searching around for alternative solicitors.

'We also offer continuity of service,' Stopford says, 'and clients don't get passed around or down.'

While business is still slow, Stopford says there is more momentum that this time last year.

'Some people who have been made redundant are using some of their pay-outs and cash to set up new businesses; quite a few are setting up internet-based companies, because of the low overheads,' she says. 'And there has been a rise in the number of people buying each other out in the SME owner-managed sector.'

Creating a connection

But how the firm attracts new clients has changed. 'We are doing more for free at the frontloading stage, giving free surgeries with accountants, for instance. It's time consuming but it has been beneficial '“ it's the chance to have an informal chat with potential clients and show them we can offer the same service as larger competitors at a more affordable rate.'

What then, are the larger competitors doing in over-lawyered Leeds?

Clarion Solicitors, formerly part of McCormicks, now stands as an independent mid-market player and still sees the sector as 'soft', as the 'big six' '“ Addleshaw Goddard, DLA, Eversheds, Hammonds, Pinsents, and Walker Morris '“ are focusing on national and international clients. But managing partner Roger Hutton also recognises that the recession has made the bigger beasts hunt for clients they would until now have regarded as too small a fry.

To counter the offensive, the firm is concentrating on its strengths. 'We've not jettisoned private client work such as wills,' says Hutton, 'and we're more likely to put a partner on an account that we believe can generate £50K.'

It also makes sure it remains close to clients. 'We want to understand what they do rather than just provide a solution to a one-off problem,' Hutton continues. The firm also encourages all lawyers, not just the partners, to develop their own relationship with clients.

At 36-partner firm Lupton Fawcett, managing partner Richard Marshall goes one step further, saying everybody in the business should be supporting the firm's clients.

'Our challenge is to create an emotional connection between us and the market, develop a real brand rather than just an image wrapper,' says Marshall '“ who is also a chartered marketer.

'As lawyers we sell something intangible and which is often a distress service, so the difference between one firm and another is not what you do but how you do it,' he says.

Externally, this means that the firm has to offer 'a logically unassailable offering' for the mid-market.

According to Marshall, this means that the firm has to plug every gap in the spectrum of services for this mid-market. 'We wouldn't just plug any gap for the sake of it; we're not going to start looking for Eurobonds or satellite leasing experts. It has to benefit our target client base '“ unless not plugging a particular gap would make us vulnerable.'

The firm's acquisition of the 'traditional' arm of Fox Hayes earlier this summer and that of Sheffield-based Hackett Windle last month are part of this evolving equation, plugging gaps in sports law, care and corporate tax.

Enter top 100 territory, and the picture begins to change. The drop in property and corporate work has affected 35-partner firm Gordons but private client, personal injury and regulatory work has carried on, while litigation, insolvency and employment have gone up, contributing to a healthy three per cent growth in turnover in the past 12 months.

As it has tightened its costs the firm has also had a bigger than normal drive in cross selling. Typically, if a client instructs the firm to sell his business, some way along the transaction there will be conversations about how the private client wealth management team can help with investment options. 'We try to think about it in a sequential manner,' says managing partner Paul Ayre.

Elsewhere the buoyancy of mid-tier firms has not gone unnoticed. Walker Morris, one of the 'big six', has not been recruiting actively in areas such as commercial property and corporate, but chairman Peter Smart says the recruitment drive in those areas on the part of smaller firms is a strong statement of intent post-recession.

The firm has been building up its litigation, re-structuring and insolvency capacity to overcome the difficulties in the transactional area. Public sector work has also been a useful source of work but even there Smart says the lack of funding is acutely felt.

'Public sector work remains an attractive source of work, especially because the government has said it would bring projects forward to help kick start the economy, but those funded through PFI, where funding comes in part from the private sector, are slow to get off the ground,' he continues.

But the big question for these firms is: can they afford to stay as they are or is growth the inevitable price for survival?

Grow or stay put?

Walker Morris, the only one in the 'big six' league to have remained a one-site firm, has no intention currently to move elsewhere or grow significantly beyond its current size.

'It gives us greater control over our destiny,' says Smart. Andwith profit per partner sitting at just below £500,000 last year, there is no immediate reason why the 52-partner firm would need to think about a different model.

At Clarion Solicitors, Roger Hutton takes a similar view. 'Every mid-tier firm seems to be talking about merging,' he says. 'We have had approaches but this is not an option we are interested in pursuing at the moment. We'd rather retain our identity and grow organically.'

Can the 15-partner firm survive? Hutton believes so, and that growing the turnover from £6.5m to £10m should provide the safety needed in the market.

But what Hutton is more interested in, ahead of the Clementi reforms, is to involve not just accountants or other professionals in the firm, but also members of the business community.

'We provide custom-made solutions to business owners, so it would make sense for us to appoint a prominent business figure to the board '“ somebody who is a business leader with connections in the local community '“ and we've already had discussions about this.'

Lupton Fawcett, on the other hand, is actively seeking to grow. 'We've used this extremely difficult phase in the market to realise our ambition,' says Richard Marshall. 'There are firms who wouldn't have wanted to speak a few years ago who are now happy to speak.'

Marshall's plan is to double the firm's turnover from £11m to £25m and the number of people from 200 to 300. And looking further ahead at the Clementi deadlines, he is convinced that 'anything that isn't resilient is going to collapse'.

Clementi

'The introduction of external capital and the arrival of organisations that have a channel to market are changes likely to have an impact even on firms like ours,' he says. 'Business aggregators will be able to put together new propositions that could be attractive to mid-market clients.'

While the firm has no plan yet about opening its capital to non-lawyers, Marshall says mid-market lawyers cannot ignore Clementi: 'There is no point surviving the recession if it's to be eaten later by the post-Clementi market.'

Back in Sheffield, Wake Smith & Tofields has taken a similar approach and John Baddeley has been open about the 24-partner firm's intention to grow rapidly through mergers.

'We are actively looking at South Yorkshire, including towns like Doncaster or Chesterfield,' he says.

Conveyancing only represents four per cent of the firm's £8.4m turnover and Baddeley is not overly concerned about the impact of 'Tesco law' on this part of the firm's work. But personal injury work could be more significantly affected.

In addition to external growth, Wake Smith & Tofields is also confident that structured referral networks will be a lifeline for regional firms. It is a co-founder of one such network, The Legal Alliance, and Baddeley believes that becoming a preferred affinity provider through such a network is one key response to Clementi.

Firms that should be seriously concerned though, are the two to six-partner firms, of which there are plenty in Yorkshire, he says. 'These firms need to get larger, shed some costs or they will not survive.'

With nine partners, Oxley & Coward sits just above that line. The firm has doubled in size through mergers since 2000 and has been consolidating its base in Rotherham. While she anticipates that the Clementi reforms will have some effect, Rebecca Stopford says it is still hard to tell how.

Only the larger firms, it seems, are more positively detached about Clementi.

At Gordons, Paul Ayre agrees there might be opportunities for external investment but says it is not of immediate interest. 'Knowing lawyers, it may take time for this to filter through,' he says.

Ayre is also content with the current £21.7m annual turnover, saying his main concern is to make sure the business is not distracted by the turmoil of the recession.

Meanwhile, at Walker Morris, Peter Smart says there has been 'quite a lot of hype' about Clementi. Bringing in accountants or IFAs into the business would only mean others would probably stop working with the firm.

Having non-lawyer partners also offers little benefit for the current partnership. Better to ensure senior non-lawyers are remunerated properly and offered a seat on the board if this is appropriate, he says.

And he is certainly not afraid of the arrival of non-lawyers in the commoditised sector.

'It's not going to revolutionise the market,' he says. 'There are already wills online for £5. But holding the client's hand is not going to be something commoditised businesses can do.'

'The average client has an irregular requirement for low-value legal service: he has an accident, buys a house now and again; does a will and dies '“ that's it. There is a need to service that requirement, but it probably won't be by high street firms,' he says.

His biggest warning however is to firms placing too many of their chips on the recovery of the property market.

'There'll be some mixed stories in the next few years,' he concludes. 'Firms that don't have a litigation or projects department won't do too well until commercial property picks up.'