Armageddon postponed

Does anyone remember good news? There was a time, not much more than a year ago, when everything seemed to be going rather well in the legal profession. Business was booming across the board, profits were up, pay rises were generous and seemingly never ending and the only worry seemed to be where we were going to find all the lawyers to satisfy the demands for services.

Thanks to the still largely unfathomable decisions of the great and good in the banking sector, 2008 has seen us move into an altogether different economic situation than the very comfortable one we had all grown used to in recent years. But just how bad are things for the legal profession? And are we perhaps at risk of being talked into a more severe downturn than really exists?

Recession of a specific nature

There is no denying that there has certainly been a slowdown in the legal market this year, and a consequent knock-on effect on jobs and career development prospects for individual lawyers. Not only has demand curtailed, but we've even seen redundancies '“ over 1,000 to date in the top firms alone '“ something almost unheard of since the early 2000s.

However this does not mean that recruitment has come to a complete stop by any means. Rather than being an old-fashioned, general downturn as we experienced in the early 1990s, this particular one seems to be developing a very specific nature, which hits certain areas extremely hard while leaving others relatively or even completely unscathed. Among the latter group is employment, where we are actually seeing an increase in demand for experienced lawyers to deal with either the actual or anticipated fallout from downsizing. Contentious and non-contentious work in construction also appears to be holding up well thanks to the inherent resilience of many large projects such as those supporting the Olympics and Crossrail. There are also signs that the downturn is prompting a return to a more litigious attitude as companies resort to law to enforce contracts and, perhaps most important of all at a time when cash is king, collect debts. Demand for legal professionals with good experience and a track record of success in this field is consequently growing steadily. And, perhaps not surprisingly, we are now starting to see a rise in interest in lawyers with insolvency experience, although not as yet at the levels that some of the more gloomy commentators have been predicting.

Bigger is not necessarily better

For a relatively high proportion of small- to medium-sized firms the Armageddon is still not happening. Because so many have retained diverse client bases, as opposed to focusing on the hitherto highly lucrative work generated by the financial services sector, they have been much less badly hit than their larger counterparts. Smaller firms have also benefited from the fact that their staff tend to be more easily re-deployable into areas of work that are still holding up. A generalist corporate lawyer, for example, is much easier to move around than someone who has spent the last five years focusing on nothing but securitisation.

Smaller firms with a less hubristic approach to growth are also less vunerable. Having resisted to the now rather dubious decisions of their larger cousins to move into expensive, 'prestige' accommodation when the boom was underway, they now find themselves unburdened by the levels of debt that are forcing some major names into shedding staff at all levels.

Despite all this, pay has remained generally flat, and where people are moving it is often not for immediate higher financial rewards but for potential future earnings, to develop experience or expertise or simply for greater security. Only where a skill set is very hard to find, in pensions or taxation work for example, are we still finding firms paying significant premiums to attract staff.

Which areas have felt the worst effects of the economic storm will perhaps come as little surprise. Finance, corporate and real estate have all been hit this year but, even in these specialisms, recruitment goes on. The lesson seems to be that, if you are good enough, you can still get a job in practically any area of the law.

Is the world your oyster?

So much for the UK market, but what is happening in the rest of the legal world? And could this be a good time to look at a posting overseas as a way of riding out the recession? The short answer to these questions is, of course, that we are not in a localised downturn, but a global one and there are consequently few locations which can offer complete security to the worried British lawyer. However, this does not mean that the demand for their services has dried up. France, for example, is still a relatively positive market and Italy, Spain and Germany are all still recruiting strong corporate lawyers from abroad, although command of the local language (at a much more significant level than simply ordering a beer) is essential.

In the Middle East, and in particular in Dubai and Abu Dhabi, demand remains strong, although it is showing signs of slowing down with firms being much more specific about experience and expertise requirements than before.

The offshore jurisdictions, such as Bermuda, the key Caribbean financial centres and the Channel Isles, are all still bringing lawyers in from the UK, but the massive growth of the past few years has come to a halt. Some of the top firms are satisfying needs by redeploying staff, and corporate finance work has dried up altogether. Good experience in funds, litigation or insolvency, however, still remains in demand.

On the other side of the world, firms in Hong Kong and Singapore are still recruiting and are particularly interested in lawyers with knowledge of the language that is so key to successful work in mainland China '“ Mandarin. And while the large-scale recruitment campaigns that have been run by major Australian firms have been put on hold, this does not mean that they have lost interest in members of our own legal profession. Instead they have moved to a 'cherry-picking' strategy, targeting specific skill sets, areas or even individuals, confident of the relative strength of the Australian economy and the added attractions of sun and surf.

Investing in the future

One of the key signs that we are not facing a significant collapse in the demand for legal services across the board is the fact that some firms are actually seeing the downturn as an opportunity. Consequently we are witnessing relatively small firms acquiring talent that they simply would not have been able to attract in the past because of their lack of 'brand'. Firms with strong interests in the property sector, for example, fortunate enough to have cash-rich clients, are bringing in specialists now in anticipation of a 'feeding frenzy' once the market bottoms out. And across the board practices are hiring partners with relatively insignificant followings if they perceive that their skills will be of immediate use once the market starts to move upwards once again.

The idea of investing in the future rather than focusing solely on today's profitability seems to be the smart thinking of those with the luxury of not being burdened with crippling overheads. The challenge for the future is whether these smaller firms can retain their newly acquired talent as and when the market starts to pick up once more. As yet it is, of course, too early to tell, but we are already seeing signs of a much more sophisticated approach to staff retention than was the case in the last downturns in the early 2000s and back at the beginning of the 1990s.

How long this downturn will last and how much worse it will get is of course anyone's guess, however we can make some predictions as to how it will affect the working lives of lawyers in the UK over the next few years.

The pressure in on'¦

The first and obvious effect will be the fact that almost everyone in the profession from fee-earner to support staff will need to raise their game. Unless the recession turns out to be unexpectedly shallow and brief, costs will become a major issue and the decision to hire or retain will come under ever greater scrutiny. Everyone will therefore need to look out for opportunities to demonstrate how they either currently are or could be adding value to a firm, and softer skills such as those connected to business development or retention will become increasingly highly prized. At the same time firms will need to pay extra attention to the motivation and development of staff to head off defections of their best people as morale comes under pressure along with the longer hours, extra stress and stifled financial reward that any downturn almost certainly delivers.

'¦but lessons have been learned

Mass redundancies, at least in my view, are unlikely to become commonplace unless recession tips over into depression. Firms of all sizes seem to have finally learned the lesson of the early 1990s '“ that every downturn will come to an end and if you do not have the right people on board to take advantage of this, you can end up in serious trouble. They are now therefore taking a much more strategic approach to staffing, targeting redundancies at weaker members of the team rather than at whole classes, focusing on those who may have been hired in haste during boom years and redeploying people to new areas of law or even, in the case of larger players to other, busier offices if at all possible. The international firms, in particular, have benefited from their cross-border reach to move individuals, at least in the short term, to relatively resilient markets such as the Gulf, and have consequently solved what had become an increasingly thorny staffing problem at the same time.

The next year, perhaps the next couple of years in the legal market will certainly be

quieter than the preceding ones '“ the boom is over, at least for now. What firms and individuals need to do now is to accept that the downturn is here and deal with it.

That means acknowledging that pay will not keep rising all the time, that desirable jobs will be more difficult to get, and that life in the profession will be a lot more hard, competitive and unforgiving than it has been for some time. Once this happens the panic will stop and lawyers at all levels will get on with getting back to basics, focusing on clients, delivering good work and developing new business.