Annual Law Firms’ Survey: Adapting to a new world
12 November 2019
After an uncertain year for the business landscape, this year’s Annual Law Firms’ Survey has a very relevant theme, ‘Adapting to a new world’. Every year the PwC survey gives an insightful snapshot of the state of the UK’s legal sector and the latest publication offers a relatively bright picture in the face of economic and political uncertainty. Several overarching themes and trends emerged in this year’s survey.
"Adoption of digital and emerging technologies has advanced again across the industry"
Technology is clearly front-of-mind in the legal sector, cropping up in all areas, ranging from growth opportunities to business support. Technology also ties into attracting the right workforce and building a culture that meets employees’ expectations and optimises resourcing to boost utilisation and morale. Despite an increase in headcount in 2019, high staff turnover suggests some issues are still to be addressed and reveals a demand for firms to digitally upskill their workforce.
Adapting to the digital revolution is a clear trend in the legal sector. At this point, only small steps are being taken when it comes to capital investment in emerging technologies - an average of £597k was invested by firms in the UK’s top-100, while the majority don't have a robust strategy or metrics to manage integration of emerging technologies. There are also some concerns with cyber risk and a widespread view that not enough is being done to reduce risks through crisis management. Nevertheless, there remains a fear of being left behind and having to compete with larger firms for the newest technologies.
“International offices contributed more to profit growth than UK firms”
The legal sector was resilient in responding to a volatile political environment, reporting growth in both revenue and profits (albeit both slightly slower than 2018). Overall, financial health is growing, indicated by profit per full equity partner (PEP) rising across the industry - but a squeeze on profit margins was felt particularly by UK firms. However, global financial performance was relatively strong despite the challenging nature of markets both in the UK and globally.
International offices contributed more to profit growth than UK entities, with firms focusing growth efforts towards international markets. Next to technology, uncertainty surrounding Brexit and the economy is seen as a significant challenge, with further delays to a resolution of the Brexit conundrum adding more uncertainty and pressure.
Growth opportunities in new international markets and increased investment into these markets by larger firms is expected. Firms need to be agile to find the right markets for investments and prepare for the threat of new entrants in some markets.
"Adapting to a new world and what the future holds"
Adapting to a new world is undoubtedly a major theme in the legal sector, with changing technological, political, and economic landscapes challenging existing processes. Although firms recognise continued investment in technology is required for survival, more investment and planning are needed. With geopolitical uncertainty also influencing decisions around some potential new markets, adaptability is, more than ever, a key consideration.