Report highlights post-lockdown recovery in family and private client work

Divorce: Lockdown increase

Demand for family and private client services recovered in the second quarter of this year as the impact of the first national lockdown began to take effect, research has found.

However, researchers estimated that by the end of June the market for legal services as a whole had shrunk by 6.9%.

The second Gross Legal Product index from LexisNexis compared the performance in the second quarter of 2020 to the growth or decrease in demand experienced by different practice areas between 2017 and 2019. The first was published in June.

Demand for family law fell by 2.3% in the first quarter, after falling by 1.6% over the previous two years. By the end of the second quarter, it was up by 2.2%.

Researchers said demand for family work was driven by “the human cost of lockdown”, with higher rates of divorce and domestic disputes.

“We expect this outlook to be maintained – as the family legal system returns to near-full capacity, there will be a backlog of work to be dealt with, driving legal activity levels until the end of 2020 and beyond.

“Unfortunately the rate of divorce, abuse and family complications regarding care of children have almost certainly grown as a result of the crisis.”

Private client work fell by 2.9% in the first quarter of 2020, following a very small decline of 0.4% over the previous two years. By the end of the second quarter, it had grown by 3.2%.

Researchers said the pandemic had driven “strong growth in end-of-life work, with probate applications up 10%”, although firms may have suffered from a drop in high street footfall.

“In the medium term, good news for the economy may be more mixed news for private client if, as looks increasingly likely, an effective vaccine is distributed widely in the first half of 2021.”

Employment law continued its strong performance from the first three months of 2020, growing by 3.9%.

Researchers said that the counter-cyclical nature of employment law meant that legal demand should continue to grow as the jobs market weakened, and the needs of businesses for legal advice would rise, with more redundancies likely moving into 2021.

The devastating initial impact of the lockdown on conveyancing was mitigated slightly as a decline of 25% by the end of the first quarter was reduced over the next three months to 16.5%.

Researchers said that, at this point in the market, “mismatch in supply and demand has propped up house prices but hasn’t helped the volume of transactions (the key factor for conveyancers)”. But as we have reported, more recently some conveyancers are now having to turn work away.

The dramatic slump in immigration work, which fell by 20% in the first quarter of the year, slowed to 17% in the second.

The hardest hit areas by the end of June 2020 were civil litigation, down by 21% and criminal litigation, down by 27%.

Researchers said the short-term outlook for litigation generally was “encouraging”, with courts reopening and functioning remotely.

“There will be a backlog of cases – some commentators have claimed that it will take years to complete the work that has been delayed. This will increase the amount of legal activity in the second half of the year.”

On civil litigation, researchers said the crisis had driven more “unusual and legally complex disputes” than seen in a typical recession.

“Across almost every sector of the economy, contracts have been disputed or obligations broken – all of which requires legal input.

“Even if the full extent of this growth cannot be managed through the court system, it is likely that arbitration and mediation work will be strong for the medium-term.”

Meanwhile, official statistics show that the UK’s legal industry generated revenues of £3.5bn in October 2020, the second strongest month in history.

While results were marginally down by 1.7% on October last year, that was by some margin the highest billing month ever recorded for legal industry revenues in the UK, according to Office of National Statistics data.

Month on month, October 2020 saw revenues grow strongly at 16.2% from September 2020, which itself had seen a large rise on August numbers. Legal significantly outpaced the overall services sector in October, which fell by 2.3% from September to £179bn.

Louis Young, managing director of litigation funder Augusta, said: “These results demonstrate what many have been saying about the strength of UK legal market participants.

“Despite continued uncertainties of Covid-19 and Brexit, our law firms have shown their metal over recent months. Many firms are now looking to the future and building plans for growth.

“We expect firms will be seeking to improve their financial positions for 2021 by considering all options.”

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