Almost half of City firms view Brexit as likely to harm them and more than two-thirds see other professional services firms as the overwhelming competitive threat among recent entrants to the profession, according to a survey published yesterday.
The benchmarking survey, by accountants Crowe Clark Whitehill, found that while regional firms were preoccupied with hiring and staff retention matters, almost a quarter of City firms named Brexit as the biggest challenge to their future success.
Though leaving the EU might present work opportunities for London commercial firms, on balance around half perceived Brexit as a net threat, while fewer than one in ten thought it would be a net benefit. However, a quarter of City firms believed it would have little impact on them.
Something regional firms and their City counterparts did agree on was that among recent arrivals to the profession, rival professional service firms – notably accountants – presented the greatest threat to their livelihoods. More than half of regional practices shared this concern with nearly seven out of 10 City firms.
The perceived danger posed by alternative business structures (ABSs), virtual law firms, or the availability of online advice was low by comparison. The threat of acquisitive practices registered with 18% of City firms, and fewer than 10% of regional firms.
The report said: “In the face of this threat, the industry has also seen specialism move in the other direction, with some law firms choosing to increase their financial expertise by hiring tax, accountancy and corporate finance professionals, while also promoting senior finance staff into partnership under the [ABS] rules.”
They noted that 10 years ago there was a widespread fear of ‘supermarket’ law firms, but this had dissipated. They asked: “Perhaps firms are considering the prospect of a new age of multi-disciplinary practices?”
Among other findings, the survey said many firms were “cautiously optimistic” about their growth prospects, with the strongest year on year results posted by firms with a turnover between £10m and £20m.
But almost 20% of firms with turnovers below £10m had experienced a fall in revenues.
Despite fears for the future, more than 90% of City firms said their revenue had increased in 2016-17, a third of them by more than 10%. Growth in regional firms was not far behind.
However, around two-thirds of regional firms said they had not met their targets and profit per equity partner fell in 40% of firms.
Louis Baker, Crowe’s head of professional practices, said: “Grappling with fierce price competition – including the threat of new market entrants, particularly the encroachment of other professional services firms into legal services – is…a key worry for City lawyers, while regional firms are more concerned about the talent pool, harbouring fears over the availability of high-quality personnel.”