The Smith & Williamson Survey of Irish Law Firms 2016/17 found that there is a significant reduction in confidence in 2016 and in the outlook for 2017 in the legal sector as only 50% anticipate an improved outlook for their firm and the sector down from 74% last year. This reduction is more pronounced in Top 20 firms where confidence for an improved outlook for 2017 for the sector has dropped from 100% to 38% with almost one in two of the top firms expecting a stable outcome for 2017.
The study found that the key issues facing the legal sector over the next 12 months continue to be maintaining profitability, pressure on fees, cash flow pressures and recruitment and retention of staff (specifically in the top 20 firms).
Revenues are up for 64% of firms in the last year (84% of the top 20 firms) and profits increased in 57% of firms in the last year (62% of the top 20 firms). Almost one in two (44%) of these firms saw increases in excess of 10% in profits.
In relation to Brexit, most firms fear the longer term impact of Brexit with all the top 20 firms thinking Brexit will have a significant impact on the legal profession over the next five years.
Commenting on this, Managing Director of Smith & Williamson Ireland Paul Wyse said that: “There is a glass half full/half empty scenario in responses about Brexit in the shorter term as to whether firms see Brexit as a threat or opportunity with 44% seeing it as a negative thing for the sector (62% of top 20) but 64% see it as less of a threat to their firm.
He continued: “Most respondents anticipate that Brexit will result in more UK law firms opening offices in Dublin, and also mergers and acquisitions by UK law firms in Ireland.”
One in two firms have increased their staff numbers in 2016 (92% of the top 20 firms) and expect to increase staff numbers in 2017.
In terms of pay, one in three firms implemented a pay increase of 3%+ last year, while almost one in two of the top 20 law firms made pay increases in excess of 5% during the same period. One in three firms surveyed made no change to levels of pay and 11% of those who responded to the survey decreased pay.
There has been a notable increase in cyberattacks on law firms in the past 12 months.
Cyberattacks were up almost 50% on last year with 29% of all firms surveyed subject to a cyberattack in the last 12 months. This figure has increased from 20% in 2015.
Of the top 20 firms, 38% had been attacked compared with 33% last year. In 52% of cases, the security breach was caused by malware and in 35% of cases the breach was caused by ransomware.
Most firms see investment in technology as a key driver to achieve efficiency and better client service. The use of technology to manage the firm and communicate with their client base is a crucial strategic development for the next five years. Overall spending on IT is up from 4.9% (as a percentage of turnover in 2015) to 5.6% in 2016.
Commenting on this Paul Wyse said: “This year, we have seen a dramatic increase in cyberattacks and while law firms see investment in technology as a crucial driver for their businesses, it is important they consider cybersecurity as an important part of that investment.”
The Smith & Williamson Survey of Irish Law Firms 2016/17 was conducted by Amárach Research.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
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