The last three years have drawn to a close heralding another 12 months much like those that went before: depressing. The eurozone flirting with break-up, fiscal woes holding back Western economies and a subdued legal market. Check, check and check.
But drawing to the end of 2013, commercial lawyers are facing an outlook that is, in highly relative terms, not half bad. The word from senior City partners has been generally upbeat since the summer. The first half financial results have, if anything, exceeded those raised expectations. We are looking at the best set of like-for-like financial results seen for five years from major UK law firms. Even allowing for the weak comparison point of H1 2012/13, early numbers are robust across a wide range of firms.
In 2014, there will be other breaks from the New Normal. For one, Western economies look set to be (again in relative terms) solid performers, with the US and UK on track for respectable growth. In comparison, fast-growth emerging economies in the Middle East and Asia are likely to underwhelm for the second year in a row. The sustainability and underlying reality of the growth story of three of the Bric economies – China, India and Brazil – came increasingly under question as 2013 wore on. Such a dynamic looks like it will be even more evident in Latin America and Asia in 2014. Worryingly for many City firms, there is no sign of a quick return to boom in Australia while China remains as difficult to make money in as ever. Asia is a key arena for serious international law firms and the mood among the most established players has thawed since the summer, but there’s no easy money in this protectionist, heavily-lawyered market.
Drawing to the end of 2013, commercial lawyers are facing an outlook that is not half bad.
2014 also looks to be the year in which alternative business structures (ABSs) move from fad to genuine players. With more than 200 licences handed out and some players already struggling, there will be more high-profile setbacks for the New Law brigade. But the smart money has to be that a select band of these outfits will get real traction during 2014 – any managing partner hoping for news of Co-op-style cuts to save their bacon would be foolish. As a related footnote, the regulatory dynamic for the profession will continue to be significant, albeit buried in interest-draining jargon; the current settlement on policing and training the profession remains anything but settled.
A more upbeat market will raise the question of whether advisers will maintain the more creative and value-driven approach adopted under intense client pressure. My hunch is yes, unless this modest upturn becomes something more substantive, at which point those deal-junkie instincts will be hard to tame.
2014 will still be turbulent – the foundation of the return to growth is too weak and the structural damage inflicted on weaker law firms too great for some sudden return to stability. The threats are as great as ever for the hindmost. But there will be a little more opportunity too. Best wishes.