But what of the lawyers indeed?

I suggested to one of my colleagues this morning that he should read The Lex Column, and in particular The law of diminishing returns. The question it put was

But what of the lawyers? As private partnerships, they are shielded from close inspection, but some pain probably lies just around the corner.

The answer?

But there are already signs of forced consolidation, especially among US firms overexposed to a sickly domestic market. Anecdotal evidence from European firms with big overseas networks suggests that several American outfits are desperately seeking mergers. Expensive offices in Hanoi and Bahrain used to be seen as a drain on partners’ takings; now they may be mandatory to survive. Charge-out rates fell, in real terms, during the recession of the early 1990s. Newly qualified lawyers should nail down those six-figure salaries while they can.

The comments were directed at the global players, but they hold good for most law firms. There is little doubt in my mind that consolidation, and pain, is coming. The current economic climate is yet one more accelerator.

It was not all doom and gloom

The good news is that, unlike banking, the industry generally bills on a time-spent basis, so failed deals and falling transaction values won’t annihilate takings. Insolvency and litigation practices, too, should provide a buffer, as businesses fail and claims mount. And there are a few cost levers to pull: routine word-processing and finance functions could be dispatched to cheaper locations worldwide.

Yes and no: time based billing is already under threat (see previous posts) and it is rare that there is not an element of contingency in deal fees.

Legal Week’s poll today is ‘Will a major law firm go the way of Lehman?’ (and see Charon QC’s post Law review; sackings, shortselling and stupidity. . .) And the voting? Currently 68% are saying No – law firms will tough it out and 32% are thinking we are all under threat.

A Dismal Science

See Paul Hodkinson in Legal Week this morning. The LSE has “included law in its annual list of non-preferred subjects for undergraduates”. He reckons that this risks having the legal community up in arms. I doubt it. Those of us who have the misfortune to practice law already know that his assertion that law is a ‘dismal science’ is all too true.

The novel life is not enough

An interesting snippet in a report in Legal Week that the newly appointed head of Appleby’s global structured finance department, Jeanne Bartlett, had left private practice with DLA Piper in 2006 “to write a novel”. Clearly she has either completed the novel; or the lure of institutional work (or perhaps just the money) proved too great.