Let’s start by saying; stay safe, stay home, stay positive.
This is a period of uncertainty, anxiety and, of course, buzz words. As we settle into the ‘new normal’ of “pivoting to the current situation” and we look to “strategies and wins during this period of flux” let’s remember that it’s “an opportunity not a crisis”.
Now that we’ve got the generic quotes out of the way, let’s get serious. It is tough at the moment. This article will look at some trends that might emerge.
Legal sectors and a recession
It is looking likely that we are going to go into recession next quarter. The question is whether it will be a V-shaped recession like post SARS or a U-shaped one similar to the GFC. In either case, the reality is that the legal industry is typically more recession-proof than most for a variety of reasons. Essentially, there are certain legal services which will always be needed, despite the state of the economy.
The areas likely to see a decrease in activity:
- Corporate: Some areas of corporate law will likely slow down. High value M&A is likely to be one of the first areas to be immediately affected in the short term. However, after discussing this with senior Partners over the last few weeks this may change towards the end of this calendar year as PE firms look to invest some of their cash piles.
- Litigation: In the short term, as courts are closed, this will cause an initial backlog and see a reduced workload for litigators. However, we generally see an increase in litigation during times of recession. That remains to be seen in this case. In the run up to this crisis commercial litigation was one of the busiest areas across multiple firms.
- Construction: Again, in the short-term this is likely to slow down. It was recently another area where there was high demand so there are some positive signs that this will only be a small hiccup.
Areas likely to see an increase
- Employment Law: Sadly, as we see businesses making redundancies and collapsing, we are sure to get some issues with breaches in employment law. This is likely to be a key area of growth in the short to medium term.
- IP: Although demand is not likely to increase, there will likely be a steady stream of work. As long as people are coming up with new ideas and looking to protect their brand there will be work for IP lawyers.
- Litigation: As mentioned earlier, generally litigation is an area that sees increased demand during a recession.
- Banking, Finance and Restructuring and Insolvency: It is likely that restructuring and insolvency practices will see a surge in demand as more businesses become impacted by uncertain economic times. This spike in demand has been seen during every downturn. Similarly, it is likely that refinancing options will be explored.
- Insurance: The insurance sector will be very busy in the coming months. It is already an area of law in which we are seeing extremely high demand within the superannuation, life insurance and disability insurance. There will be an increase in financial lines work.
Some key takeaways
- There will be some layoffs and reductions in salary or delayed salary reviews. However, many firms seem to be operating at near maximum capacity per lawyer, so perhaps not as wholesale as people fear.
- There might be an initial slowdown in litigation, but disputes will continue, and it will come back.
- Corporate, although initially slow, will come back in the near future when market confidence returns and PE firms look to re-invest.
- Big law firms are diversified enough to survive. It will likely take some retraining and reorganisation of current staff.
- The Australian legal market is not a bad place to be. The Australian lawyer is, on a global scale, highly skilled, diversified in their practice areas compared to US and UK based lawyers and on relatively low salaries.
Stay home, stay safe, and try to stay positive!