The economic picture for lawyers, accountants and investment specialists in the West Country is rosier than a year ago, reports Natalie Birrell. However, competition to win contracts and clients is tougher than ever
Competitive pressures are increasing significantly for professional services firms which are working harder than ever to grow their market share despite signs of economic growth and renewed confidence.
A survey of almost half of the UK’s top 250 law firms reveals that 81 per cent believe the environment has become more competitive in the last 12 months.
Almost nine in every ten respondents expect to see greater competition as a result of the Legal Services Act.
The research published earlier this month was commissioned by accountancy and investment management group, Smith & Williamson. Partner Ian Cooper, who heads the firm’s professional services practice in Bristol, said: “This is a very interesting time for professional practitioners and law firms in particular.
“While the Legal Services Act may create more business opportunities, it has also achieved its aims of increasing competition.
“The growing challenge is how firms respond and grasp new opportunities for themselves.
“Our survey indicates that confidence has returned to pre-recession levels although, in my view, we are looking at a longer-term recovery. Many firms have recovered profitability through cost-cutting and internal efficiencies.
“The focus now is on achieving sustainable growth in a climate fraught with uncertainty.
“One of the major developments of 2014 which is due to take effect on April 6, is the way in which partners of Limited Liability Partnerships are taxed.
“We are looking very carefully at the legislation and the eligibility criteria in particular, which are more onerous than originally thought. The cash impact on firms and individuals is potentially significant.”
Despite increasing competition and other challenges, some of the West’s law firms have not only survived but are emerging as even stronger players in their various markets.
UK law firm TLT, with its headquarters in Bristol, and Withy King, which has offices in Bath and Swindon, are two very different firms which have expanded rapidly in recent years.
David Pester, managing partner at TLT, believes firms need to work out what they want to be famous for and tailor their delivery model to suit. “In a market which is as mature and heavily fragmented as legal services, firms have to be absolutely clear about their offering.
“In the last 12 months we have seen a greater rush towards specialisation and consolidation, driven as much by economic challenges and increasingly discerning buyers of legal services than by regulatory changes.
“Our strategy over the last few years has been to build specific areas of expertise in response to client demand.
“This industry focus has allowed us to develop a national reputation for our work in specific areas of the law while maintaining our local services.
“While we will never be complacent, our strategy continues to have traction in the market. This has taken us from a single office in Bristol to a UK-wide firm, and seen turnover triple since 2002.”
Withy King is on track to achieve its 20 per cent growth target in two rather than three years.
Managing partner Graham Street said: “We do not set out to follow or copy our competitors. We stick to what we do well and then work hard to do it even better. Over the last few years we’ve invested considerable time and resource in identifying and understanding what our clients and our people want and then going all out to deliver it. Our rebrand played a big part in that.
“The legal services market is vast and the issues facing small, mid-tier and large firms are very different.
“We are all experiencing unprecedented levels of change which make it difficult to predict the future, particularly when it comes to consumer buying behaviour, the role of technology and the nature of client communications.
“Retaining and developing the best people to respond to these challenges will be a key issue, even more so now that economic conditions are improving.
“We are pleased to have been ranked in the Sunday Times Top 100 Companies to Work For and will continue to motivate, recognise and reward our staff for the integral role they play in our success.”
One of the many changes facing professional services firms is the introduction of Alternative Business Structures (ABS).
Over 200 ABS licences have been granted so far, most of them in the last 12 months, allowing non-lawyers to own and run legal businesses.
Co-operative Legal Services in Bristol is one of them. Blackstar Legal, trading as legalmatters and run by former Clarke Willmott chief executive, David Sedgwick, is another.
This market expansion is fuelling competition in the private client and insurance sectors, causing some law firms to re-evaluate their position. Lyons Davidson, which has a large office in Bristol, recently announced its intention to form an ABS joint venture with insurer Admiral.
ABS are also giving accountancy firms food for thought with at least one of the Big Four raising the possibility of offering legal services to its clients. This follows the announcement that the Institute of Chartered Accountants in England and Wales (ICAEW) will be allowed to grant ABS licences.
Mergers are an ongoing feature of the professional services landscape and this trend looks set to continue. Geoff Gollop, president of the West of England Society of Chartered Accountants, merged his practice Geoff Gollop & Co with Milsted Langdon in 2013.
He said: “Keeping on top of the economic cycle is likely to be the biggest concern in 2014 with recruitment and growth issues dominating the agenda.
“With capital and cash often difficult to come by, careful business modelling will be more important than ever.
“Bristol fared much better than anywhere else outside of London during the recession so in many ways, is better placed to capitalise on the recovery.
“Bristol has always been very competitive for accountants and is becoming even more so.
“Clients are more discerning and aware of their options which means firms are looking at service in new and innovative ways.
“The market remains fluid and we continue to see people leaving top 20 practices to set up on their own, ensuring high standards of professional advice and service are maintained.”
Chartered accountant Ed Corrigan, who runs Corrigan Associates, agrees that the market is highly competitive but believes this is positive for clients wanting to get the most value from their professional relationships.
He said: “Businesses are increasingly looking for practical advice and support rather than a policeman to regulate their activities.
“Advances in IT have had a significant impact on the way in which legal and accountancy professionals are able to work with their clients. The development of cloud-based accounting systems, for example, makes it easier to collaborate on the same platform and means both parties can work on the same set of books at the same time.
“There are still accountants who take a more traditional approach which may work well for certain types of businesses.
“We know that clients do not change their accountants lightly and place great value on personal relationships.
“However, it’s important they don’t lose out to more forward-looking practices who are embracing new technologies and different ways of communicating.
“We work with a lot of technology businesses, many of whom are run by young graduate entrepreneurs who expect their accountants to talk their ‘language’ and operate in the same space they do.”
Desmond Hudson, chief executive of the Law Society, said legal practitioners in the West were also taking a more creative and innovative approach to business.
He said: “We are seeing a significant change in the way businesses engage and communicate with their clients.
“The use of social media for example, has increased exponentially over the last 12 months.
“Whether they are using it in the right way and achieving the desired outcomes remains to be seen but it does show that firms are adapting to changing technological circumstances.
“Despite unprecedented changes and increasing competition, the legal services market in the West remains extremely strong with a national and international standing.
“We saw some significant mergers in 2013 as well as consolidation, diversification and outsourcing.
“There are more challenges ahead, particularly for law firms specialising in crime and working with legally aided clients, but I believe we will see further growth in 2014 and can look forward to a positive evolution, rather than the ‘big bang’ which many had feared.”