It’s approaching 10pm in the last chance saloon for the justice sector

Years of defunding British justice has placed the legal sector’s economic viability at risk, impacting hundreds of thousands of people who rely on us every year to maintain their basic rights, warned the Law Society of England and Wales following the chancellor’s announcement on the winter economy plan.

Law Society president Simon Davis said: “We welcome the government’s new Job Support Scheme, flexibility on deferral of tax bills and the extension of loan schemes.

“These measures will bring much needed relief for many law firms, enabling them to be resilient during the winter months. But further action is needed.

“Justice in this country is under pressure like never before – with an already dire situation now compounded by COVID-19.”

The Law Society has today submitted our key recommendations to the Treasury’s 2020 comprehensive spending review (CSR).

In its CSR, the Treasury needs to do three key things:

  • ringfence the Ministry of Justice’s (MoJ) current budget and commit to ensuring that it rises yearly at least in line with inflation
  • take urgent measures to save legal aid – this includes restoring it for early legal advice so people avoid ending up in court at a much greater cost
  • invest in the future of legal services to release their full potential. There remain significant economic challenges ahead for law firms as they take steps to protect their future, compounded by Brexit – longer term the legal services sector, which underpins so much of our economy, is likely to be disproportionately hit by no deal, according to research we released before the referendum

Simon Davis added: “The English and Welsh justice system is in the last chance saloon with 10pm fast approaching.

“Without urgent changes in funding, there will be a massive impact on hundreds of thousands of ordinary people who rely on it to seek justice or enforce their rights.

“It is time the MoJ’s budget is prioritised so we can get back to providing the world class justice system for which England and Wales is internationally renowned.”

Simon Davis went on to stress the fundamental role of the legal services sector in helping the country fight back economically after the pandemic eases.

He said: “Law firms will play a crucial role in helping to restart economies at local, national and international level, while solicitors will assist in kick-starting key markets that drive the UK economy, including the housing market, commercial transactions and business deals.

“The legal services sector supports the employment of 552,000 people in the UK, and in 2018 the sector was worth almost £60bn (GVA).

“The strength of the UK’s legal services sector underpins the country’s prosperity and will help drive Britain’s economy forward towards recovery from COVID-19.”

In August, the Law Society surveyed the largest 300 law firms in England and Wales by turnover to provide a picture of how firms have responded to the coronavirus pandemic, with law firms making business decisions echoing that of the economy.

We asked respondents a range of questions, such as if they had taken advantage of any of the government support measures, including furloughing, deferring staff recruitment and VAT payments, as well as how trainees, newly qualified (NQ) solicitors and partners were affected.

Government support

A high rate of firms – 86% – surveyed used the government’s coronavirus support schemes.

The vast majority of respondents – 84% – deferred VAT payments, while 36% delayed partners’ and members’ July 2020 tax payments, 26% used coronavirus loans and 12% delayed their PAYE, NIC and corporation tax payments.

Staff recruitment and furlough

The figures show a large number of firms deferred recruitment of new staff, both for support staff – 72% – and fee earners – 64%.

In March, the government unveiled its Coronavirus Job Retention Scheme, which topped up employees’ wages to ensure they received 80% of their pay, while they were not working but were furloughed.

48% of respondents to our survey furloughed more than 10% of their staff, 16% furloughed 5-10%, 16% furloughed less than 5% and 20% did not furlough any employees.

Partners and trainees

Our research found that 86% of firms reduced or deferred partner drawings, 48% reduced or postponed staff bonuses, 46% enforced holiday use, almost half (46%) of the surveyed firms reduced working hours and pay, while 36% started redundancy consultations.

Other measures firms have taken include: 26% reduced staff salary bands, 24% delayed partner or counsel promotions, 16% increased equity partners’ capital contributions, while 6% reduced the number of equity partners and a similar number closed offices permanently.

For trainees and NQs, 26% deferred the start of future trainees, 20% reduced trainee or NQ starting salary, 16% reduced the number of NQ positions and 10% reduced the number of future trainee positions.

Keeping business going

As for how coronavirus had impacted firms’ projections for the current year, 78% took steps to revise their budget and 22% kept the same budget.

In terms of how working remotely affected productivity, 46% stated it had remained the same, 32% said it had decreased and 22% had increased.

Law Society of England and Wales president Simon Davis said: “With law firms undertaking their business planning, these statistics prove that the sector has been impacted in a myriad of ways by the COVID-19 pandemic.

“The legal profession shares the stresses experienced by other sectors and will have to make some tough decisions in order to survive the economic fallout caused by the pandemic.

“It is clear that law leaders have tried to share the burden when implementing measures which affect junior lawyers, senior lawyers and support staff.

“We need the government to commit to investing in our justice system and to reversing the trends of recent years to ensure that people in England and Wales can be sure that their legal health is looked after in the same way as their physical health by the NHS.”

Notes to editors

* Of the 300 firms we surveyed, 50 firms responded to our call for views. The survey was conducted in August 2020.

** Figures taken from our Contribution of the UK legal services sector to the UK economy report, commissioned from KPMG.

Find out more about our Return, Restart and Recovery campaign

Read our submission to HM Treasury

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Press office contact: Naomi Jeffreys | 020 8049 3928