Pressure on legal sector as Brexit anxiety mounts
The legal sector is experiencing steady growth, with almost two-thirds of firms reporting both revenue and profit increases, up slightly from last year.
However, there are increased pressures on the bottom line as costs such as staff, IT infrastructure and preparing for Brexit drain resources. Those are among the key findings of the Smith and Williamson annual survey of Irish law firms - 115 firms took part in the survey, including 18 of the top 20.
The results clearly point to a great deal of uncertainty, with a combination of Brexit, Trump and the political instability of both the UK and Irish governments creating a vortex of unease among legal firms. While firms are continuing to perform well, only 47pc have a positive outlook for the sector in the next year, compared to 52pc in 2016 and 74pc in 2015.
In response to this uncertainty over Brexit, most top 20 firms have Brexit strategies in place and are currently executing them. However, 97pc of non-top 20 firms do not have a Brexit strategy, and this is very concerning considering the number of firms (41pc) that believe Brexit will negatively affect them.
Despite this, quite a sizeable number of firms (20pc) believe Brexit will positively affect them, and this is indicative of the many new opportunities which Brexit could throw up.
However, there are a sizeable number of UK firms in advanced planning for moving into Ireland. Of the top 20 firms, 44pc have been contacted by UK firms about a possible merger, acquisition or strategic representation arrangement. In addition, more than 1,000 solicitors from the UK have registered with the Law Society, of which more than 200 have obtained practice certificates in the last 12 months.
This would indicate the legal sector here is going to face a significant increase in competition from the UK following Brexit, while also contending with a possible downturn in the economy. As a result of this, I would strongly urge all firms to develop and implement a detailed and effective plan for the medium-long term based on a hard Brexit.
Advances in technology are also set to have a continuing major impact on the legal sector in Ireland. As the survey highlights, an increasing number of firms are spending an increasing amount of their annual turnover on updating and improving their IT infrastructure. More and more firms are realising the importance of this as competition heats up and firms who don't embrace the latest technology are being left behind. Another reason for this increase in IT investment is the increase in the number of reported cyber attacks on law firms, which are up 60pc from last year, and affected 61pc of the top 20 firms in the past year.
One of the major findings in this year's survey is the increase in the number of firms finding recruiting and retaining talented staff a major problem.
With the improving economy, firms are doing more business and hiring more staff. This has fuelled competition for talent. At the time of the survey, 52pc of firms reported vacancies.
Paul Wyse is managing director of Smith & Williamson