Though law firms are currently performing well, there are concerns amongst the profession around resources required to keep up with demand, and overall confidence levels have dropped slightly from the previous quarter.
These were among the findings of the second of a recently launched quarterly legal sector survey undertaken by law firm accountants, business and financial advisers Armstrong Watson and partaken by 70 senior legal sector professionals.
The firm has analysed the results of its January Legal Sector Pulse Survey, which was introduced in October to gather an insight into the confidence levels and views of the legal profession in response to the current climate.
Confidence in the sector as a whole appears to have dropped slightly, although confidence within individuals’ own firms appears to be higher and rising further from last quarter. However, when rating the risk of investments in a law firm, each of the lower quartile, median and upper quartile results are nearly 10% lower than last quarter, and responses on current cash levels held are also 10-15% lower than the previous quarter.
Resource, retention, recruitment, and productivity are all current key issues within the sector, with ‘the great resignation’ causing problems for many employers. Remuneration was stated as one important factor, with staff looking for additional benefits as well as salary increases in a competitive market. Remote and flexible working also feature highly as firms are finding staff approached by others outside of their regions, and the ability to work from home with an improved work/life balance continues to have strengthened appeal.
Rob Adamson, Restructuring and Insolvency Partner, said the survey suggests there are no hard and fast rules as to which type of law firm is more likely to be sensitive to the changing economic landscape, although a strong culture is important,
“Firms of different sizes are experiencing similar challenges which are affecting confidence, and a higher number of fee earners does not necessarily correlate with higher confidence. It would therefore seem appropriate to reinforce the advice that we are providing to businesses in many sectors at present – keep forward planning and if there are potential difficulties on the horizon, make sure that you are proactive in dealing with these,” he said.
“With the increase in demand for staff resulting in higher wage costs and the planned increase in National Insurance Contributions in April, together with the restrictions on landlords lifting at the end of March, there is likely to be further pressure on cashflow.
“Being mindful of the ability to generate sufficient income and convert work in progress to cash continues to be a necessary focus in 2022, and firms should be mindful of these proposed increases when looking at their budgets for this year.”
The survey aims to identify any developing trends to help support strategic decision making in the legal sector.