I had to wonder about the timing of research by CityUK sponsored jointly by the Bar and the Law Society published last week. Whilst the government is threatening to cut the income of legal aid lawyers and personal injury claimant (and probably as a result defendant) lawyers in dramatic ways, it promotes the profession’s success by focusing on it’s capacity to generate fee income. It’s a very interesting report, and basically appears to be part of a bid to remind the world of our professions’ strong position in relation to international oriented commercial work and also of the broader point that, commercially, the profession is a success. Fee income of over £23billion in 2009, a whopping 2.8% of GDP and a net contribution to balance of payments of £3bn (a figure £1bn higher than the legal aid budget) are impressive figures. The big firms have ridden the recession better than smaller firms it appears (partly through cutting jobs – mainly, but not solely, at the non-partner end and relocating certain functions to cheaper sites in the UK and elsewhere: cost cutting has reined in expenditure to the tune of £500m). International firms did better than domestically oriented firms. US firms also did better, building on their links with US investment banks. Things may be getting better in any event. The report notes: “Although caution remains on the business outlook, firms have begun to hire new staff in 2010 and trainee intakes are approaching pre-crisis levels.” Indeed, the report tells us profits rose more steeply in the first half of this financial year than they did last year.
The legal press understandably, and justifiably, ran this as a success story. The Gazette headline, for instance, caught my eye with ‘Legal Services generate £23bn for the UK economy’. At one level, this is perfectly proper. Indeed, it is rather nice to have a little light shining around the clouds of doom and gloom that currently gather. Legal services are an industry like any other and the size of that industry is an indicator of its success. Economists might argue that service economies depend upon increasing specialisation in divisions of labour and the legal profession is an indicator of one very successful one. Not only that, the report reminds us that on the international stage ‘our’ professions, which are themselves increasingly internationalised in there composition, do very well. But I could not help wondering how anyone outside the profession would view these figures. Imagine a headline that went like this: Doctors generate £23bn for the economy. We might feel a little less squeamish about that than we would about lawyers, but we might also be surprised if encouraged to think in those terms. We would expect to see good news stories emphasising the impact of health professionals on the nation’s health, and we might want to be reassured that we were spending more on health services compared to similar nations, but we would not expect to be invited to applaud the size of the spend in and of itself.
Thinking of it another way, I imagined how the Chairman of the CBI or the in-house Counsel Group GC100 might view this. This is how I imagined them rewriting the Gazette headline. Legal Services generate £23bn of transaction costs for the UK economy. I simplify and render cynical for effect, but I hope a fair point is made. One hopes and expects that businesses see value in their legal services beyond the cost they incur; they don’t only buy legal services because they ‘have to’. Put another way, legal services are not always distress purchases. But I doubt the wisdom of the profession signalling its success through the promotion of its bottom line. The notion that legal services has value outside of the notion that some jobs ‘just need lawyers’ is one which is not well developed, in concrete terms, by the professional bodies or academics. Both groups tend to focus on familiar legal concepts like ‘rights’ and ‘risk’ and ‘certainty’. Complexity is often the result and one with uncertain consequences. In a recent discussion on contracts I asked in house lawyers if anyone evaluated the quality of their contacts and how. Most suggested it was a matter of individual judgment. Encouragingly, I did hear of one partner in a well-known City firm who has a way, of quantifying the value of a contract to their clients.
This leads me onto my final point. The profession may need to get significantly more sophisticated in how it establishes the value of what it sells. We are seeing in both legal aid and personal injury work how a combination of economic exigencies and firmly held ideology can lead to potentially profound changes in legal services. Once client groups, be they government or big business, start to doubt the value of services then serious change can occur. The profession has been slow to grasp this: preferring to rely on argument, anecdote and opinion polls in its defence of legal service markets rather than on solid research (arguably, the best information on the value of legal aid services came from the Legal Services Commission’s research arm and Citizens Advice). One cannot expect quick or clear answers to what value is derived from good quality legal services but it may be sensible to strive for better answers than the size of a few partners pay packets.