If last year was the year that the legal market considered change, then 2018 was the year that they certainly embraced it. Technological transformation was the theme that dominated law firms this year across the United Kingdom, which allowed firms to centralise their processes, often away from the traditional London power base.
The year continued where the previous one left off, confidence in the market grew as the amount of vacancies outweighed the active candidates in the market. The trend of a move towards regional hubs started to burgeon by 2018, yet despite figures showing 39% of law firms experiencing double digit growth, paradoxically nearly a third of firms reported lower profits. The weakness of the pound plus the previous year’s investment into the regional hubs, being cited as significant factors.
Change was felt in every department. Systems were embraced, with the rise of Artificial Intelligence, Business Intelligence, Data Analytics and advancements in technology all making their presences felt. Fixed pricing models grew in popularity and reflected a change in Finance away from the traditional hourly rate, as firms grew conscious of their improvements with regards to offering services to Clients. Specialists were employed throughout the larger firms with top 50 firms now having newly created positions in place, including Legal Project Managers, Innovation Managers, Continuous Improvement Specialists and Legal Technologists.
The main areas of growth within law firms were reported as Risk and Compliance, IT, Business Change, Human Resources and Finance. This continued the trend of the previous year.
US firms continued to thrive on this side of the Atlantic. UK firms were regularly out-performed by their American counterparts with an average Profit per Equity Partner showing an improvement of 41% over those from these shores. Net profit was also reflected in these figures which showed the stateside firms offering an 8% growth compared to 6.1% of UK lawyers. As a result, American firms continued to invest heavily.
As the shadow of Brexit loomed over the country, the uncertainty remained a challenge for the United Kingdom’s law firms. Many firms had Brexit committees in place to deal with the impending changes and 85% of all firms throughout the country identified our severance from the European Union as one of the biggest hurdles that they are currently facing. This reflected in recruitment, especially towards the close of the year, as apprehension of the type of deal that marked our economic divorce, made firms cautious.
So what does this mean for recruitment?
2018 was a year of two halves. The optimism of the early part of the year was replaced by a ‘wait and see’ attitude towards the latter half, with firms increasing the length of contracts on offer instead of permanent positions.
Firms continue to grow despite this caution but with a shrinking talent pool to choose from, this means that candidates have even more choice. Proven and experienced candidates were few and far between, as law firms undoubtedly face a huge talent shortage across every discipline.
Aware of their market worth, many candidates have chosen to look for positions that offer more flexibility; work/life balance, flexible working, part time hours, increased salaries and training and development became increasing drivers in the candidate’s psyche, in the search for a new position.
Whatever the indecision, hires across the board increased. Whether permanent contracts in the early part of the year or temporary or long-term contracts towards the end, the amount of vacancies registered was at record levels. A reduction in permanent roles was replaced by a short-term stop gap in contracts.
The past 24 months has seen the trend for firms to invest into in-house Resource teams to attract their own talent, which proved successful in certain areas but struggled in niche specialist areas.
What’s happening to salaries
Financial reward is a key factor with candidates moving to a rival firm as they leverage an increase in salary of up to 30% in certain areas; an extraordinary rise compared to the average 3% offered as an increase to staying in their current position. In certain positions, albeit not all, moving can provide substantially increased remuneration.
The growth areas mentioned previously such as Risk and Compliance, saw seismic upward shifts in reward, as candidates became increasingly hard to find. Firms struggled with their recruitment within these areas and counter offers were prevalent.
Even salaries at a lower level were increased as the battle for the cream of the graduate market replicated that of their more senior counterparts. At the senior end of the market, whilst salaries didn’t spiral out of control, significant hikes were common in the hiring of staff to court new talent.
US firms continued to usurp their UK rivals with regards to salaries at all levels of staff.
What will 2019 bring?
With our divorce from the European Union dominating the headlines politically, economically and professionally, the opening months of 2019 will be a key indicator as to how law firms progress.
Despite this, we undoubtedly face a talent shortage whether in a permanent or contractual capacity and it is becoming increasingly challenging to meet the demands of the continued growth of Clients.
As the largest independent multi-disciplined legal recruiter in the UK, Career Legal are here to assist your recruitment strategy for 2019. We hope that you find this survey informative and influential for the year ahead.