Ongoing pressures such as the effects of the coronavirus pandemic are causing disruptions and the shifting of priorities in the UK legal market in 2021, according to findings from the State of the UK Legal Market 2021 report from the Thomson Reuters Institute. The State of the UK Legal Market 2021 combines research on 250 senior corporate counsel, financial results from the UK operations of 34 US-based law firms and 156 stand-out private practice lawyers.
With law firms switching to fully remote working environments as well as other pressures such as courthouse closures and Brexit, there has been a shift in client priorities. As a result, UK law firms are re-evaluating how their clients’ legal needs can best be met amidst these pressures and disruptions.
How Has the COVID-19 Pandemic Affected UK Law Firm Client Partnerships?
Given the demands that 2020 put on UK corporate legal departments, there was an increased focus on the strength of their relationship with external law firms. The report showed that amidst the shift to remote working, clients are looking to create long-term partnerships with law firms that have a deep understanding of their business operations. The report found that 47 percent of corporate law departments said firms who commit to a long-term partnership create more value in the relationship. This focus on strong interpersonal skills comes as a result of investing non-billable time in clients, the report said.
“This wasn’t the year where clients looked out and said, ‘Hey are we going to bring three or four of our firms on a roster?’ This was the year that clients looked at all of the firms they are currently working with and said, ‘Actually, which two or three do we trust the most?’” said David Johnson, Account Director for Thomson Reuters Acritas in an interview with the National Law Review. “We’ll start to see firms doing a bit more to make sure that they are that trusted advisor.”
While technology plays an important role both with those working within law firms and with clients, the importance of the more meaningful connection has taken center stage. According to the report, the greatest changes in what drove favorability in the UK market are customer service (17 percent) and a good working relationship (15 percent).
The report predicted that in 2021 and beyond, many firms will strive to create sustainable servicing models that focus on developing a more involved and strategic relationship with clients. Specifically, the report showed that law firms need to appraise which skills are valued most in the industry they serve and then determine how to develop those skills. The top skills that help the UK legal market stand out compared to global markets include being practical and pragmatic, being approachable and friendly and investing in developing good working relationships, according to the report.
“The big things that come through from the UK side from our research in particular is that it’s the ability to be practical and pragmatic in the way that you deliver the work,” Mr. Johnson said. “It’s having industry knowledge. How that feeds into the kind of pain points that their clients are facing is definitely going to be one that we are going to see more of.”
Brexit and Coronavirus Play a Role in UK Legal Market
Alongside higher demand for long-term firm partnerships, the report found that the demand for cross-border legal advice had increased since 2017 because of the uncertainty caused by Brexit. Specifically, 80 percent of UK corporates were looking for international legal support, and 47 percent of UK corporate legal spend was dedicated to international legal work.
“I think the interesting thing here is that we’ve gone through a global pandemic, and we’ve gone through an incredibly disruptive political and economic period. We’re still very much transitioning through that period,” Mr. Johnson said about Brexit. “There’s still a lot more unknowns than knowns in terms of how this is going to play out. I can’t imagine it’s going to drop off dramatically in the next couple of years. I think the challenge is about how firms can organize themselves around this international need to support clients.”
One pain point that developed as a result of remote work during the coronavirus pandemic was the deterioration of collaboration between cross-border teams. Eighty-three percent of UK partners reported internal barriers to international relationships, including IT and knowledge sharing structures. The report notes firms that foster a culture of collaboration between cross-border teams will be able to better support their clients’ international needs.
This is especially important considering 38 percent of UK corporates are looking to increase their international legal spend moving forward.
Even though UK corporates are looking to increase spend, the report notes that 28 percent of UK-based buyers felt the main thing that could be done to improve their satisfaction with firms was for services to be more competitively priced. Firms that are willing to address pricing issues with clients foster more long-term relationships and bring more, the report noted. This can be achieved through exploring alternative fee arrangements.
However, with increased demand also comes increased competition, according to the report.
How Have UK Law Firms Adapted to Competition During COVID-19?
Alternative legal service providers (ALSPs), non law-firm providers of legal services such as accounting firms, provide competition and increase the pressure on UK law firms to adopt innovative, technology-driven legal service delivery models that can provide greater flexibility and value. As a result, UK law firms are adopting more flexible working arrangements and focusing on technology.
“I think one of the areas that’s going to be here to stay from personal conversations with managing partners in the market is how do you create an office environment that provides that kind of flexibility for those who want to come into the office and those who don’t?” Mr. Johnson said. “I think that discussion has got to be right top and center in terms of managing committees across the next six to 12 months.”
Law firm partners touted a shortened commute, improved efficiency and more productive use of technology as the top benefits of flexible working. According to the report, 86 percent of attorneys want flexible working arrangements to continue after the coronavirus pandemic ends, and would consider leaving their firm if such arrangements weren’t available.
Specifically, stand-out UK lawyers surveyed said they’d like to work remotely two days a week, see a 10 percent reduction in working hours (even with a reduction in pay) and the ability to have different start and finish times or spread hours across the day. However, 80 percent of stand-out lawyers cited remote working as a barrier to developing new business during the pandemic, further highlighting the importance of improving current client relationships.
That being said, law firms are looking to invest more in technology amidst the shift to remote work and increased competition from ALSPs, with 74 percent of senior UK partners believing that their firms should be investing more in technology. Eighty-four percent of corporates think their firms should explore more innovative ways to use technology.
“The ALSP market is not necessarily being adopted as strongly as we’re seeing from the US at the moment, but we’re starting to see more because of the pushback on price and the financial challenges that UK businesses and legal departments are being put under,” Mr. Johnson said. “I think that this is going to become more prominent and we’ll see higher levels of usage of these over the course of the next couple of years. And the last 18 months have accelerated that process.”
How the UK Legal Market May Change After COVID-19
One of the most important takeaways from the report is that clients’ desire for deeper institutional relationships and an increased level of business understanding with firms isn’t new, but that the COVID-19 pandemic amplified the need for an increased focus on these areas. Specifically, the report noted that for the first time, the UK legal industry may be facing the consequences of failing to adapt to those needs earlier.
However, UK firms can emerge from the pandemic in a better position through evaluating the relationship between the firm and its clients, focusing on cross-border collaboration and adopting technology to foster flexibility, efficiency and innovation.
