Law firms more optimistic about 2022 after tough year, survey reveals

Turnover and profits remained below pre-pandemic levels at most Irish law firms over the past year and most of the top 20 firms experienced cyberattacks, a survey of the sector has found.

Almost half, 48 per cent, of companies continued to avail of Government supports during 2021, down from 70 per cent in 2020, with smaller firms under most pressure.

Despite the challenges, the survey found most firms, particularly the larger ones, are optimistic about the year ahead with some experiencing improvements over the last 12 months.

Recruitment and retention of staff is the key issue for Dublin firms with many indicating willingness to facilitate remote working into the future, according to the annual survey of law firms carried out for professional service and wealth management firm Smith & Williamson by market research firm Amárach.

Willingness to facilitate remote working looks set to be a key issue for employees, the survey suggests.

Cyber risk is regarded by 27 per cent as one of the biggest challenges over the next three years. Most of the top 20 firms (60 per cent) reported cyberattacks on their systems in 2021 but 62 per cent of smaller firms in Dublin and 74 per cent of regional firms did not report any such activity.

The survey was completed by senior leaders in the firms and reveals that two in three companies (63 per cent) anticipate an improved outlook for the sector in the next 12 months with 39 per cent of firms reporting revenues recovering and increasing over the last year, rising to 53 per cent among the top 20 companies.

However, almost half (49 per cent) of smaller Dublin firms experienced a downward impact on fees due to competitive pressures.

Maintaining profitability has been a huge concern for all firms, big and small, the survey found.

Most (58 per cent), reported profits are still below pre-coronavirus levels and 29 per cent experienced a significant reduction in revenue.

For the top 20 firms, 47 per cent used Government support this year, down from 60 per cent in 2020. More than one in three regional companies (36 per cent) said their staff continued to use the supports in 2021, down from 50 per cent in 2020.

Life outside of work

In terms of tax, 29 per cent of firms used tax warehousing and deferral of tax payments this year, down from 43 per cent in 2020.

Recruitment and retention of staff is now the key concern for all top 20 firms and for 70 per cent of all companies in Dublin. More than one in three (35 per cent) firms increased staff numbers over the last 12 months, up from 22 per cent in 2020, but 23 per cent had reduced staff numbers.

The report says there now appears to be “a disconnect” between how employees and employers see the future workplace, with employees in favour of a greater focus on life outside of work.

Most of the top 20 firms reported they are facilitating remote working into the future while about one in three regional companies and one in five smaller Dublin firms said they are unlikely to do so.

The report identified that decisions by employers on remote and hybrid rules are key issues for employees and may result in a potential movement of talent.

Half of all firms, and 80 per cent of the top 20 firms, noted a need to invest more in the wellbeing of staff. This year marked a return to pay increases with most (80 per cent) of the top 20 companies reporting increases in pay awards. Increases were in excess of 6 per cent in more than half of those firms who bumped up pay.

Speaking at the launch of the survey, Paul Wyse, managing director of professional services at Smith & Williamson, said it shows "a great shift in control from company to employee, as employees re-examine their work-life balance and their working arrangements. While the Covid-19 pandemic and Brexit have caused turbulence in profits throughout the last year, from the survey we are seeing a legal sector with a much more positive outlook for 2022."