Two years ago next week the Law Society published research indicating that thousands of small firms could collapse within six months.
This appears alarmist now – almost amusingly so. But hindsight is not wisdom deferred. It certainly didn’t seem an unreasonable prediction at the time. Just over a month into the first pandemic lockdown, cashflow pressures and lower fee income were really starting to bite. Residential property transactions had ground to a halt. No one could view houses. The demise of live hearings slashed the amount of work available from the courts. Social distancing and the proscription on face-to-face meetings, meanwhile, severed client ties in other core areas, such as the execution of wills.
That the apocalypse never happened can be attributed to chancellor Rishi Sunak’s uncharacteristic munificence. The most unlikely people discover their inner corporate socialist when economic meltdown looms (just as New Labour did in 2009).
There was much more to it than that, though. The profession’s own ingenuity and adaptability played a large part too. You stepped up in the crisis. Those stories of solicitors witnessing the signing of wills through car windows appear bizarre now a kind of normality has returned. But it got the job done, didn’t it?
For the best-managed law firms, indeed, the pandemic presaged not bankruptcy but boom. Median net profit per equity partner increased by a remarkable 39% in 2020/21, according to the Law Management Section’s annual benchmarking survey.
It is this KPI, above all else, which confirms that a return to pre-pandemic ways of working would be nothing short of perverse. To put it simply, fees did not go down, but the costs attached to them did.
There will be no repeat of the furlough and fiscal windfalls firms enjoyed at the height of lockdown courtesy of the chancellor. But one of the more indicative statistics in this survey to keep an eye on is non-salary overheads as a proportion of fee income. In this category, many of the substantial savings realised during the crisis should and will be permanent.
Now, about those soaring office heating bills…
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