Some law firms suffered “serious falls” in revenue during May and, without a pick-up in new instructions in June and July, “the pain may become unbearable”, new research has warned.
While there were teams and whole firms that bucked this trend, it said it seemed as though revenues have settled at a new low.
Law firm consultant Simon McCrum – former managing partner of Darbys – has been tracking the impact of the coronavirus, initially through four weekly qualitative surveys and then one for the April month-end and now for the May month-end, in which 21 firms of various sizes took part. You can read our stories from the previous weeks here.
He said this was “by far the most pessimistic” of the six. “March and April month-ends were okay for UK law firms – by and large because firms were living off their existing WIP. The fear at those month-ends though was that there was a time-bomb that would show itself down the line. This report shows that that was indeed the case.
“Some serious falls in revenues have been reported, and if there is not a pick-up in new instructions through June and July – and of course we are then getting into the summer months – the pain may become unbearable.
“The government schemes have kept many firms in the game – but in the game for what? There has to be new oxygen coming into firms as they run out of old cases to work on.”
Several firms reported an increase in residential conveyancing instructions, now the property market has reopened, towards the end of May.
A number of respondents said they had taken out the government’s Bounce Back Loans as a precaution – they are interest free for the first year and 2.5% thereafter, and can be repaid at any time.
Mr McCrum said firms could hang on whilst government support continued and did not have to be repaid, “but their real futures are now in the hands of the general and the business public, and therefore in the hands of the pandemic”.
The “good old days” were gone for now, with many firms thinking of re-structuring their businesses “in light of new realities”, the solicitor said – a number talked about imminent redundancies.
“It looks to me – and to many of the participating law firms – that revenues have settled at a new low and we really do need to see continued ‘unlocking of the lockdown’ if the good old days are to return.”
Mr McCrum urged firms to market to existing clients: “Let them all know everything that you can do for them,” he said.
At the same time, firms need to be “quoting profitable prices, catching every minute you spend on files, billing every minute that is recoded, making sure all files are being worked on all the time” – even recruiting if need be – “and getting paid quickly”.
He explained: “If you are not doing all of these things, there is little point in marketing for new work from new clients – it’ll just help you to stand still rather than really progress.”
To help law firms understand the Covid-19 crisis and its impacts, and to help them to respond, Mr McCrum is posting regular briefings on his website, giving out relevant parts of his forthcoming book, The Perfect Legal Business.