Employment work: Big demand
Employment and commercial work are seeing the biggest increases in demand from clients, research has found.
However, the lockdown has had a “devastating impact” on practice areas like conveyancing and immigration, where there have been much bigger decreases in demand.
The Gross Legal Product index [1] from LexisNexis compared the impact of Covid 19 to the growth or decrease in demand experienced by each practice area between 2017 and 2019.
Demand for employment law, which had increased by 25% in the previous two years, surged by over 10% in the first quarter of this year, fuelled by the pandemic.
Researchers said “many of the government initiatives aimed at insulating the economy from the impact of Covid 19 will create demand for employment lawyers”.
With a million businesses applying for the furlough scheme, there would be increased activity for in-house employment teams “and their reliance on outside legal advice for interpreting the rules when making applications”.
We reported yesterday [2] that data from Citizens Advice showed people becoming increasingly concerned about redundancy.
Demand for commercial law, which had previously increased by 7.8%, rose by 8.3% as the virus hit.
“Although legal demand (particularly spend on outside counsel) will be determined in the long-term by overall business health, there are reasons to believe commercial law will be resilient despite Covid 19 damage to economic activity. Market sentiment is surprisingly buoyant.”
Tax, though a smaller area, did even better, with demand increasing by 17% due to Covid-19, after very modest growth of less than 6% in the previous two years.
Researchers said there had been “unprecedented demand” for tax lawyers created by the “enormous take-up” of government financial rescue schemes, and core tax work was likely to be insulated from the economic downturn.
The picture was very different for immigration services, where demand expanded by over 21% between 2017 and 2019, only to plummet by 20% in the crisis.
Property law shared a similar fate, increasing by 15.2% in the past two years before falling by almost 25% this year.
“Both the underlying drivers of legal services (immigration, visa applicants) and the direct proxies for legal activity (processing of visas, tribunals) have almost entirely frozen.
“There is a small amount of counter-cyclical activity, such as emergency extensions granted to 3,000 NHS workers whose visas were due to expire. This has not offset a very large drop in demand for legal services.”
Researchers reported “headwinds” in both the residential and commercial property sectors, hit by a “total freeze” in the market caused by the lockdown.
They warned that the housing market, which had reopened, “may take years” to recover in terms of transaction volumes, while demand for commercial real estate was likely to decline with the shift to remote working and online shopping”.
Both crime and civil litigation were also hard hit by Covid 19, though not as badly. Demand for criminal law services fell by 15%, after a slight fall of less than 3% in the two years before.
Civil litigation had already experienced a fall of over 18% and fell by over 11% during the crisis.
There were much smaller fluctuations in demand for family and private client law. Demand for family law had fallen by 1.6% between 2017 and 2019 and fell a further 2.3% in the first quarter of this year.
Demand for private client work had hardly changed, having slipped by 0.4% over the past two years. It fell by a further 2.9% this year.
Insolvency, an area where demand might have been expected to rise sharply in the pandemic, actually saw a further 3.6% fall in demand, which had declined by 8.6% over 2017-19.
Researchers said “the fast and comprehensive response of the UK government has made the picture more complex” and corporate insolvencies were actually down in the first quarter of this year from the same period last year.
The report is the latest to gauge the impact of the coronavirus on law firms. Lats week, a survey by DPS Software found that small law firms have been hit hardest [3] by lockdown, while data from another legal IT company, Quill, showed that new instructions were running at about 70% [4] of the pre-lockdown level by early June, but there were definite signs of a revival, with conveyancing roaring back.
Meanwhile, the UK’s legal industry generated revenues of £3.3bn in April, 4.7% down on March 2020 and 5.5% down on April 2019, according to Office of National Statistics data released last week.
According to litigation funder Augusta, which highlighted the figures, “in comparison to the wider economy which has experienced falls of over 20%, and the fact that March 2020 and April 2019 were record months for the legal industry, these results are surprisingly positive”.
Managing director Louis Young said: “With April however traditionally being one of the two most prosperous months of the year for the legal industry, and the fact that revenues booked in April primarily include matters taken on before lockdown, the decline is likely to be amplified significantly going forward.”