The Lawyer is keeping a running tally of job losses and redundancies in the legal sector. For some time now we have seen redundancy consultation notices being issued by small to medium sized and then larger law firms. On 8th January, Clifford Chance the world’s largest law firm announced the redundancy consultation period for up to 80 of their London office lawyers and, yesterday Allen & Overy, another magic circle firm, announced the likely redundancy of up to 10 lawyers from their Hong Kong office. This morning, Dentons have announced plans to make up to 80 of their staff redundant.
Yesterday, The Lawyer reported: “Leeds-based firm Fox Hayes has gone into administration a month after the departure of its commercial and private client teams for Lupton Fawcett.”
Our European neighbours take the view that: “… Britain’s economy is about to suffer its most vicious slump since 1946, shrinking by a drastic 2.8 per cent this year, Brussels warned yesterday, as fears over the scale of the recession mounted despite the new banking bailout. In a dire assessment that threatens to leave Alistair Darling red-faced at a meeting of European Union finance ministers today, Brussels predicted that the UK would suffer the worst recession of any large European economy. (Source: Times Business)
Yesterday, RBS shares plummeted. Times Business note: “RBS, worth £75 billion only two years ago, is now valued at £4.5 billion, even though it received £32 billion from taxpayers and shareholders less than three months ago. “
The restrictions on short selling of bank stock were lifted on 16th January. Short selling of bank stocks seems to have happened as predicted. Where did short sellers get the stock to shortsell. Cynics have suggested from the government. Capitalists@Work, a leading finance blog, made the very pertinent comment… ” Ending the short-selling ban has not worked, as predicted. Bailing-out the banks without suspending the shares has not worked, again. The government has repeated the same mistakes it made in October.”
CityUnslicker, one of the Capitalists@Work blog authors, in reply to a comment on the blog wrote: ” RBS balance sheet is £1.6 trillion. If we take this on and there is say a 20% loss – £320 billion. Then add Barc, LBG, not to mention HSBC. There are assets as well as losses; but if we put these on the government sheet today the UK then I see a sovereign default within a few days in the current febrile atmosphere. We need some space, why oh why did they not suspend bank shares this morning…”
OK… I think the point is fairly clear and I need go no further in laying the foundation for my main point.
It is not unreasonable to suppose that there will be further, possibly significant, redundancies in the legal sector. It is possible that other law firms may fail and go into administration. There have been rumours for some time that a set of Chambers is facing severe cashflow problems.
Yet the law schools continue to report enthusiastic application for places and will, no doubt, be more than happy to take students on to courses this coming September and report increased profits for shareholders (where applicable) and for university funds where there are no shareholders or trustees to satisfy. Clearly, I am failing to understand some basic law of finance or supply and demand. It would seem, to my untutored eye, that demand for lawyers is decreasing – for otherwise there would be no redundancies being announced, no three day weeks, no closures and no bankruptcies. These redundancies, unless again I am failing to understand another law of finance, mean that the supply of lawyers (in this case, experienced lawyers) will increase.
Given that law firms are cutting back on recruitment it is almost certainly the case that students passing out of the law schools after their LPC (and BVC in the case of the Bar) may not get a post and those fortunate enough in the last year to get a traineeship may find they are not taken on when their training contract is completed. This will, ineluctably, add to the supply of trained (but not experienced) lawyers chasing jobs.
Given that no-one seems to have a clue how long or how deep this recession is going to be – let alone the Governor of The Bank of England, The Prime ‘Mentalist’ or The Chancellor of The Exchequer…. why do students and law schools think it is a great idea to train as a lawyer now (at fairly significant expense) when the reality is that it will take some time before the excess supply of experienced and recently qualified lawyers is absorbed by a resurgent legal profession when we finally do start to see the green shoots?
The cynical argument that law firms will continue to recruit cheap labour in the form of trainees, rather than more expensive trained and experienced lawyers, doesn’t really hold water for a sector driven by quality demands. And who is to say that the whole earnings structure for lawyers will not face revaluation (similar to house price ‘corrections’) and assistants and partners will be prpeared to work for less just to hold onto their positions in a febrile and possibly deflationary market.
I think I need to go on a ‘finance and economics for dummies’ course so that I can learn how the impossible can be achieved by the law schools. for they, alone in the sector, seem to have cracked the problem of boom and bust. Or is it just one big Ponzi-Madoff?
I claim no expertise in this area and welcome comment, rant, vilification, groups of people with flaming torches standing outside hurling abuse late at night. Over to you.