While commentary from LB100 leaders in recent years may have occasionally sounded like a broken record, with gingerly repeated soundbites about ‘cautious optimism’, this is certainly not true of our 2021 report.
This time last year, despite the market’s best efforts to put a brave face on things, we were still very much in the throes of coronavirus uncertainty, with no-one really knowing the true extent of the damage. ‘I’m more worried about what happens next year,’ noted Roland Turnill, Slaughter and May’s head of M&A in 2020, spelling out the quandary felt by many at the time. ‘The financial crisis was six to eight months of nothing happening, but this could be a bit more of a lull and then six months from now it gets tough. It will be a funny-shaped recovery.’
Certain themes that have long stayed on the periphery have been accelerated by Covid, not least the imperative of investment in tech that proved a lifeline in the days of enforced working from home. However, the financial carnage that many dreaded has not come to pass, as the LB100 data makes clear. In fact, the market is far from catastrophe.
Last year in profit terms, the message was clear that firms were cutting their cloth as a seemingly inevitable bout of financial turbulence loomed large. Then, the LB100 group’s total profit barely moved. Now, it’s a starkly different playing field. Average profit per lawyer (PPL) surged an incredible 11% to £129,000 and average profit per equity partner (PEP) showed even more resilience with a 12% increase to £949,000. It’s enough to make those firms that tightened their belts last year with cost cutting and furloughing staff squirm with embarrassment.
This sharp rise in profit broadly equates to fee-earners putting in more billable hours and without even the respite of a commute, work trips or holidays. The incessant hamster wheel will no doubt come at a cost to the mental and physical health of all those high-achievers out there.
That said, there has obviously been a widespread realisation that for the music to keep on playing, firms must prioritise something other than the numbers.
Gareth Price, Allen & Overy’s managing partner, is not alone in his view: ‘We talk a lot about the numbers but actually they are the consequence of a series of good behaviours.’
Most are coming to the realisation that it is easier to turn a profit and add to your top line if your business is populated by happy people rather than downtrodden malcontents. And, as anyone attending our recent Legal Business Awards could attest, the electricity in the room showed how much people have craved the in-person connection that has been sorely lacking for far too long.
The war for talent and competitive tension have only been exacerbated by lockdown. There is little difference between a firm with a collegiate culture and one that resembles a nest of vipers when you’re on Teams or Zoom, but there’s probably a great deal of difference in the salaries on offer. The real challenge for LB100 leaders over the next year will be to achieve what no-one else has yet managed – striking the right balance between flexibility so that talent doesn’t vote with its feet, and ensuring the human connection is upheld with colleagues and clients. As the true impact of Covid on the recruitment market is yet to play out, that is likely to be no mean feat.