Despite varying governmental approaches to the coronavirus response across the Nordics, there is a consistent optimism throughout the region, both with regards to what 2021 holds and also the overarching impact of the virus on the markets in the long term.
‘Largely, and perhaps surprisingly, the feeling is that it has been business as usual,’ states Gorrissen Federspiel’s managing partner Martin André Dittmer of the Danish market. ‘When the pandemic broke, there was a lot of uncertainty around how the market would respond and how businesses would navigate the situation. But once the initial shock had subsided, what we mostly experienced was a focus on government relief packages and issues relating to employers’ legal obligations.’
In Sweden, most of the leading independent firms saw a rise in revenue in 2020, and Wiersholm managing partner Morten Goller argues that Norway and the Nordics generally have weathered the Covid-19 storm more effectively than many other European countries: ‘The early stages of the pandemic saw a much more difficult environment to get transactions done with uncertainties leading to gaps in asset valuation but activity rebounded after the summer quicker than expected, and Norway and the Nordics bounced back quicker, and withstood the pandemic better, than the rest of Europe.’
However, the general consensus is that this noted resilience is specific to a certain segment of the local legal markets. As Goller adds: ‘Covid-19 has seen a significant flight to quality in the Norwegian legal market, with the top-tier firms all having a very strong 2020.’
He continues: ‘To some extent, the pandemic has created a bigger gap between the top-tier firms and those below, with some law firms struggling to differentiate themselves in an increasingly competitive marketplace.’
The market also saw full-service firms take an early lead in the initial stages of the pandemic, as Henrik Kjellander, executive partner at Setterwalls, explains: ‘Diversified full-service (top-tier) firms have had an advantage when some legal areas have seen a slight decline. The established leading local firms are thriving, mainly due to their resources and specialist competences. It remains to be seen how the mid-segment firms will manage, but they do have a challenge in respect of increased competition and the general trend of specialisation.’
Dittmer also suggests that internal processes and systems may also contribute to the success or failure of law firms in the region. ‘For some firms there may yet be internal side issues stemming from their compensation models, with shifts in the balance of work creating greater tensions for eat-what-you-kill firms. This remains to be seen, but it will be interesting to see how it plays out.’
Beyond the global pandemic, other elements of the wider markets may have ultimately had an equal or greater impact on the work handled by law firms in the region. For Norwegian firms, Goller notes that the reliance on high oil prices, which fell globally in early 2020 and saw Norwegian North Sea oil prices down by 30%, remains a constant presence: ‘Norway was hit hard by the coronavirus pandemic, and as oil prices collapsed at the same time, the Norwegian economy looked set to be hit exceptionally hard. Many pointed to Norway as the big loser, but so far it seems that the Norwegian economy is among those that have fared best. Extensive government support measures have helped to dampen the impact, and thanks to higher oil prices and a tax relief package, oil investment will be less of a drag than feared.’
For Dittmer, the future potentially holds substantial changes for Danish law firms at a macro level: ‘Perhaps more significant than Covid-19, at least in terms of the long-term structure of the market, are the recent recommendations by the Danish Competition Council regarding the liberalisation of the Danish legal sector. Changes to ownership rules, for example, could potentially have a significant impact on the market here in Denmark.’
For most, the forecast for 2021 and beyond appears (at least for now) relatively rosy. ‘Many local firms performed well and reached all-time highs in 2020,’ states Kjellander. ‘With regards to 2021, we do not expect the pandemic to cause any material financial set-backs and we expect revenue growth this year’.
For those in Denmark, ‘The market is robust enough to weather the storm and firms should perform well, but as in 2020 it is going to take hard work’, observes Dittmer. ‘Share prices over the last year have risen and, as following the financial crisis, there is optimism for a strong pick-up effect once society opens up. That may not be until the second half of the year, but the expectation is for a marked increase in trading and certain businesses seizing the opportunity to consolidate.’
Put simply, Goller sums the wider feeling up best: ‘There is cautious optimism and positivity for what 2021 holds.’ LB