Editor's letter

As the countdown to Christmas begins in earnest, law firms have already started toasting a pretty promising set of half-year results. The annual champagne quaffing and party antics seem unlikely to be spoilt by suggestions in the wider business world that the fall-out from this summer’s ‘credit crunch’ could rumble on for some time to come.

November’s quarterly ‘business opinion’ survey from the Institute of Directors made for “pretty gloomy” reading, according to its own chief economist, Graeme Leach. The number of company directors “optimistic” about the overall outlook of their businesses stood at just four per cent in the three months to October, a drop from 24 per cent in the previous quarter. The decrease is even greater than that observed immediately after the Twin Towers terrorist attacks.

Although business performance itself is still “high”, Leach said the immediate concern was whether optimism could now “bounce back” to previous levels. “If it doesn’t, business investment could be hammered” he added dramatically.

And then there is the spectre of more City job losses on the cards. A recent report from the Recruitment and Employment Confederation (REC) and accountants KPMG found the index growth in permanent placements fell from 60.2 to 57.4 in October – the lowest it has been since September 2006. KPMG director Alan Nolan said the crunch had “cast its shadow over the job market”, and warned of possible further job losses in sectors that are “particularly volatile”.

Few will think the legal profession falls into this category, of course – and most firms will imagine that they can handle such fluctuations. Clifford Chance has said its recent loss of a six-associate structured finance team in New York was a “a direct response to market conditions in a specialised product area and is in no way a reflection on the general health of the US capital markets practice”. The firm made it clear no further redundancies were expected.

For the most part, law firms can adjust their offerings and strategy if necessary to focus more on different areas of work. It has been pointed out, for instance, that if some firms’ corporate M&A work suffers over the coming months, insolvency, restructuring and dispute resolution lawyers will be likely to gain. As Kirkpatrick & Lockhart Preston Gates Ellis chairman, Peter Kalis, says in this issue: “We have an array of practices that position us for all phases of the business cycle.” (p.12) Indeed, a number of firms have already been seen ‘restructuring’ their restructuring practices. DLA Piper’s head of this area for Europe, the Middle East and Africa, Simon Neilson-Clark, recently decided to step down from his position to concentrate on clients full-time. He openly cited the “anticipated increase in demand for restructuring services”.

Healthy half-year turnovers aside, however, with the arrival of the Legal Services Act firms’ general financial management is expected to come under greater scrutiny in future. A poll carried out by financial-services firm Smith & Williamson suggests up to 22 per cent of firms will at least explore options for external investment. A best-practice New Year’s resolution or two might not go amiss in preparation.

But that should come after the festivities! This is the final issue of Managing Partner in 2007, and I would like to thank everybody who has contributed in what has been another exciting year for the profession. Have a very happy and peaceful Christmas.

Richard Brent

Editor

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