The impact of the crisis on lawyers varies widely
THE ECONOMIC crisis has hit both solicitors and barristers hard, but some have been hit much harder than others. There was always a big difference between the big commercial solicitors’ firms and the barristers they brief on the one hand, and the sole practitioners, small firms and those outside the Bar’s golden circle on the other, but the crisis has brought this into sharp relief.
More than 90 per cent of solicitors work in firms of less than 10 solicitors. This does not reflect the division of legal work, with the lion’s share of the lucrative commercial transactions going to the big Dublin firms. Some of them were much more exposed to the property bubble than others.
Among the bigger firms, much of the slack in property-related work has been taken up by increases in litigation, insolvency, examinerships and liquidations. Smaller firms do not have that flexibility or additional expertise, and most very small firms and sole practitioners never did such work in the first place.
Both the turnover and profits of the big firms remain shrouded in secrecy, with only one in the top 10, Mason Hayes + Curran, publishing its financial results. Ranked number seven in terms of numbers, it actually reported an increase in turnover in 2008, up 14 per cent to €36.3 million. While it is difficult to extrapolate from this the turnover of the other firms, the crisis in 2008 would have generated work. This year is likely to be much more difficult, albeit some firms have reported an increase in activity.
All are cutting payroll costs, with redundancies, wage cuts and bonus freezes the order of the day. Earlier this year, Matheson Ormsby Prentice announced a total of 45 redundancies in two tranches, and Goodbodys sought to reduce its payroll by 10 per cent. Both also reduced pay.
There were different approaches in different firms. John Cronin of McCann Fitzgerald told The Irish Times the firm, where every partner was a full equity partner, had a collaborative ethos and sought to minimise the impact of the crisis. Although only five or six of the 68 partners worked in property, the firm did see pressure on fees across the board and needed to cut costs.
A voluntary redundancy programme led to a cut of 12 secretarial and 12 professional positions, and everyone earning over €37,500 having their pay cut by five or 10 per cent. The firm has also deferred the entry of some trainees into the firm by a number of months.
Arthur Cox also had a voluntary redundancy programme among support staff, yielding 20 staff cuts, but this was not enough, so it was followed by 17 compulsory redundancies. Pay was frozen, though not cut, and bonuses reduced. Frys had 17 redundancies overall, and redeployed a lot of people from property to litigation. It also had wage cuts.
Goodbodys had 52 redundancies, of which a “substantial portion” were voluntary, bonuses were cut and there was a 10 per cent pay cut for all senior staff.
At the other end of the scale, the solicitors most people go to with a legal problem, the small firms and sole practitioners, are facing severe difficulties. They have been badly affected by the collapse in property transactions, and are also now being hit by a massive hike in professional indemnity insurance, which is obligatory for all solicitors.
“Last year my premium was €8,000. This year we’re being told to budget for €20,000,” said Sonia MacEntee, a sole practitioner. Her practice was weighted towards the conveyancing of individuals’ homes over the past number of years, and that market has dried up.
She pointed out that solicitors must have “run-on” insurance for seven years, so premiums will have to be paid even if they want to get out. “There will be solicitors out there who will not be able to either wind up their business or stay in business,” she said.