Law firms launch new round of cost cuts as pandemic bites

International law firms with UK offices have been forced to trigger a fresh wave of cost-cutting measures in response to the coronavirus pandemic as government support schemes come to an end.

Some firms, which furloughed business support staff and enacted salary freezes or pay cuts for lawyers when the pandemic first hit, are starting to axe staff because business has failed to pick up.

Those include international groups Reed Smith and Bryan Cave Leighton Paisner, which have launched redundancy rounds in recent weeks.

The legal industry is typically more resilient than vulnerable parts of the economy such as hospitality, but lawyers have suffered knock-on effects from their clients’ woes and been hurt by a decline in dealmaking.

“As the full impact of the economy hits firms, activity levels are likely to fall and firms will need fewer staff. At that point the expensive ones may be at risk,” said Giles Murphy, head of professional practice at accountant Smith & Williamson.

Law firms also pay out the bulk of their profits to partners and run with slim cash margins, which has added to the pressure on the groups.

Although some firms have still to publish results for their latest financial year, the announcements so far have not been encouraging.

Partners at City of London stalwart Ashurst took home 7 per cent less in profits in the year ending April 2020 than the previous year.

Reed Smith, which was founded in Pittsburgh, announced last week that it was cutting 19 roles from its City office, which resulted in the departure of 13 lawyers and six other staff members. The firm said its requirements had “evolved as a result of the pandemic”. 

DWF, the UK’s largest listed law firm, announced it was closing offices in Brussels and Singapore in June and cutting staff in Dubai to 11 people.

The company, whose chief executive was ousted in May, has announced a UK redundancy consultation affecting business support staff. 

UK peer BCLP is closing its Beijing office and has launched a redundancy consultation affecting 19 lawyers in the UK and 26 members of support staff.

The moves come as law firms have adapted to remote ways of working during the crisis, reducing their reliance on legal secretaries and personal assistants.

UK law firm Watson Farley & Williams said lawyers had started taking on tasks previously delegated to personal assistants, including arranging meetings.

Lawyers are also increasingly handling documents digitally, while other jobs including booking travel and meeting rooms are not currently needed. WFW cut 12 legal personal assistant roles in August after a consultation.

Irwin Mitchell, a reputed personal injury firm with its roots in Sheffield that has launched a redundancy round, said it had identified 110 roles potentially at risk because of digital changes triggered by the pandemic.

Andrew Tucker, chief executive, said: “Since the Covid-19 pandemic began the world of work has changed considerably and the legal industry is not immune from that.” 

Chris Clark, director at recruiter Definitum Search, said: “The majority of redundancies have been support staff, but firms will use this opportunity to target fee earners in less profitable parts of the business, if revenue continues to be threatened.”

Most law firms have attempted to stave off redundancy rounds using temporary emergency cost-cutting measures. But recruiters predicted further job losses and said partners might be managed out too.

Mr Murphy said: “In good times, average and good partners do well. In harder times the average partners are often found out and firms may decide they are surplus to requirements.”

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