It might not feel like it to some, but the economic environment for large law firms has been benign for a long time. It has been difficult not to make money. According to Legal Business, the top 100 UK law firms (that is, less than 1% of the 10,000 or so in the UK), still manage to gross over £17.5 billion, even in these supposedly tough economic times. That’s at least 50% of the total value of the legal economy. And for the more than 8,000 equity partners in those firms, this produced an average net profit share (PEP) of almost £650,000. By most people’s reckoning (even in the world of clients), that’s a lot of money for a lot of people – and it is only an average. It’s not so much the size of any individual reward that’s the issue (the range is reported as £138,000 to £1,840,000 – and it’s no longer Slaughter and May, or any other Magic Circle firm, at the top): rather, it’s the sheer number of people who are able to extract this level of averaged reward in a reactive service market that is dependent on client activity.
Here we are, then, one year into alternative business structures (ABSs). For those who were expecting a revolution, the start to ABSs has been, well, muted. But was revolution ever a reasonable expectation? The statutory timetable envisages a licensing process that could take up to nine months. The SRA has also ensured that the timetable doesn’t start to run with the submission of a stage 1 application, so its nine-month timeline hasn’t been reached yet. The question is: does 36 ABS licences (ignoring the multiple licences issued to Irwin Mitchell) in the first year represent a good outcome, slow take-up by the market, or slow processing by the regulators? Has the whole thing – as many opponents of ABS would like us to believe – been a damp squib, an unnecessary and expensive addition to the regulatory terrain?