6 Coronavirus is Changing the Legal Industry | Financial Buzz

6 Ways Coronavirus Has Affected Law Firms Across the Globe

Coronavirus has negatively affected the legal industry in a myriad of ways. With business, court trials, and other types of legal activity coming to a sudden stop over the previous months, many firms have seen a significant drop in revenues.

The picture becomes even bleaker when you add to this the fact that many students who were ready to start their careers have been unable to take exams due to college closures.

And while demand has picked up in some areas, particularly in the corporate sector, the expected global recession is looming large in the minds of many partners.

In this post, we’re going to take a look at six of the main ways law firms have been affected by the coronavirus pandemic.

1.   Law Firms Have Embraced Remote Working

Most law firms around the world have been forced to allow employees to work remotely because of government-mandated lockdowns.

This has had a number of interesting effects, especially as firms have realized that traditional models of office working might not be as efficient as was previously assumed. Cutting out the daily commute, spending more time with family, and limiting office distractions has meant that many employees are more productive.

Firms have embraced remote working tech stacks. Here’s one example of a law firm CRM software, out of many, that is now taking centre stage. As partners continue to look for ways to reduce costs going forward, remote working will likely become more common and accepted in the legal profession.

2.   Most Law Firms Have Been Negatively Impacted

While there are some winners, most law firms are worse off as a result of coronavirus, with many big trials temporarily halted and dates for smaller hearings set back. Many lucrative business clients have slowed or even completely ceased trading, meaning that routine bread-and-butter legal work has dried up. Consumer-facing firms, such as those dealing with property law, have also been hit.

While there aren’t any seismic movements just yet, it will be interesting to see how everything plays out in the coming months as tax bills need to be paid. VAT is due at the end of January in the UK, for example, and many are predicting firm closures.

3.   Corporate Lawyers Have Seen an Increase in Demand

Corporate law is one sector that’s experienced higher demand, largely from companies that are implementing disaster scenarios.

Many businesses, for instance, want to take advantage of clauses relating to unforeseeable circumstances that allow them to stall, or in some cases even cancel, contractual obligations. On the reverse side, some lawyers have also been tasked with preventing signees from citing coronavirus as an excuse to renege on deals. Commentators are predicting that many of these disputes will end up in lengthy litigation.

Corporate restructuring is also in high demand as CEOs and managers seek legal outlets to save costs and limit the negative impacts of suddenly unprofitable arms of their companies.

Finally, employment lawyers have been inundated with enquiries about how to restructure contracts. Issues like paid sick leave, voluntary isolation, extended absences, and so on, have all taken centre stage.

4.   Major Law Firms Are Considering Lay-Offs and Pay Cuts

While the industry hasn’t seen many lay-offs in the previous few months, this is likely only a short-term phenomenon. Decreased revenues will mean that some firms simply won’t be able to sustain current levels of staff.

As longer-term ramifications become apparent and government furloughing and support schemes end, more firms will be forced into making hard decisions. Management will probably focus on unproductive employees and those approaching retirement when considering redundancies.

It’s also worth remembering that exam delays are preventing students from entering the job market. Firms may consider deferring incoming associates and limiting future intakes, which in turn may have an effect on the number of people considering careers as legal professionals.

5.   Law Firms Are Worried About an Upcoming Recession

The exact shape of a future recession remains to be seen. But many firms are developing strategies aimed at fostering new demand. Partners are also rethinking old pricing structures that may prove ineffective for winning major contracts.

It’s also likely that the industry will rely more heavily on slimmed-down business models, quickly cutting initiatives and programs that are considered extraneous.

While there are safety nets, additional lines of credit and support packages can only go so far. One writer has predicted a “bloodbath” in the legal sector in the coming months and years, with those firms that had issues going into the pandemic most likely to be the worst hit.

6.   New Client Demands Will Likely Emerge

As the marketplace shifts, many clients are becoming more selective about how they spend money. This applies equally to the business and consumer markets, both of which understand the extra purchasing power that comes from diminishing demand.

Clients will likely expect lower prices, for example, and in-house lawyers may look for significant discounts for work that they hand over to outside counsel.

Conclusion

While it’s easy to hone in on specific sectors that have lost out or benefited from coronavirus, the broader impacts of the pandemic on the legal sector remain to be seen.

Short-term changes are almost definite, especially in regards to remote work. Longer-term ramifications, on the other hand, are more uncertain. And it will be interesting to see how firms overcome obstacles as well as leverage opportunities in the coming months.