Along with many other industries around the world, the Australian Legal Services sector has undergone significant changes in the wake of the global COVID-19 pandemic.
According to IBSWorld Market Research Report, the Australian Legal Services Industry revenue is expected to decline. However, demand for legal services has been resilient compared with many other industries, with core offerings partially protecting industry operators. The industry has many buying markets and demand trends from each market are anticipated to vary significantly, with demand from the property sector falling particularly sharply.
On the flip side, in a recently published State of the Nation Outlook report, PracticeEvolve revealed that following a nationwide survey, mid-size Australian firms reported an increase of 20% in litigation, labour and employment law as well as wills and estate planning.
In anticipation of decreasing demand, and raising concerns regarding gaps in legal work processes, many firms supplemented their revenue by scale back of non-essential staff via reduced hours and redundancies. The IBSWorld report confirmed the industry’s downturn thus far has been more modest than expected, as another source revealed that Australia’s larger law firms are on track for another strong year, with earnings increasing despite the COVID-19 economic crisis.
Despite this relatively positive outlook, the reality facing the legal sector is challenging. The greatest challenges or concerns for mid-size legal practices in Australia as identified by PracticeEvolve, are attracting and retaining experienced lawyers (38%), using technology to streamline legal work practices (43%) and optimising client interaction with pressure to deliver value, not bill time (30%). Of greatest concern is the overall performance of the economy (60%).
Although the concept of digital transformation has been permeating the legal sector for some time now, undoubtedly the overall impact of COVID-19 has accelerated new thinking and innovation. Moving into FY21 and beyond, the sector will dramatically transform the way it operates and delivers legal services, as more firms will seek new ways to remain financially sustainable.
Post-COVID 19, Australian mid-size firms believe the legal profession will improve efficiencies in the delivery of legal services with the priorities likely to shift to more firms engaging in regular review of work processes, greater use of technology to replace human resources, formal knowledge management programs and rewarding efficiency and profitability.
PracticeEvolve survey respondents reported that the impact of COVID 19 will see mid-size firms innovative and adopt new forms of technology (71%), remote working will play a much larger role in the legal profession (76%) and more firms will expand the use of existing technology to improve legal work processes (50%). Firms will become leaner, more agile and adaptable (55%) and virtual offices will become more common (47%). There will be a greater focus on retaining and strengthening client relationships (45%). Crisis management and risk mitigation strategies will become part of law firm planning (34%).
As we all know, the COVID 19 challenge is unprecedented, both for the economy, the wider business community and the legal profession. Law firm leaders must prepare for a wide range of scenarios, the likelihood of which will depend on the effectiveness of both public-health- and economic-policy interventions over which they have little or no control.
In the current highly uncertain and rapidly evolving environment, no single course of action will be appropriate for all. However, given how much is at stake—client relationships, people, culture, near-term resilience, and the ability to accelerate out of a downturn will be paramount. Firms that can maintain a long-term perspective while moving aggressively on near-term priorities will be best positioned to prosper in the next normal.
Their ability to invest in the best technologies and the best people to imbed a culture of renewal and optimism will underpin their success.
For a more extensive insight into how the Australian legal market is performing, including recommendations on the way forward, download our State of the Nation Outlook for Mid-Sized Australian Law Firms – 2020/2021.