As we make our way through a wet and windy start to the year, we asked leaders across our agency for their thoughts on what 2024 might hold for the legal industry.
Beth Durkin, Associate Director
Beth: “A major legal story in 2023 was the SRA’s Axiom Ince intervention, which revealed around £66m of missing client money and triggered seven arrests by the SFO, amid suspicions that the former managing partner and two other directors had misused the missing funds through a sophisticated fraud. The Legal Services Board review into the SRA intervention is due for release in the spring and will raise further discussion about the role and effectiveness of the regulator in these scenarios.
Thinking broadly about reputational threats law firms could face over the coming year, in a world where fraud is increasing across all sectors and industries, I expect to see increased attention paid to fraud prevention, potentially taking the form of more muscular intervention and enforcement by regulators. I suspect we will also see further attention paid to non-financial misconduct issues at law firms, especially relating to culture and behaviours, and areas like diversity and inclusion, that influence both the experience of working in the sector and external perceptions of the sector.”
Ben Girdlestone: Joint Managing Director
Ben: “I am no political forecaster so I won’t make predictions for the forthcoming US and UK elections or what the results might mean for the world. One thing that strikes me as really relevant for the legal profession is the timing of the UK election, due by January 2025. For clients with a transatlantic offer, the timing of the UK election in relation to the US vote in November is fascinating. There are various predictions as to how the PM will time the election, but in my view the US election will heavily impact his thinking. A Republican win would arguably give Rishi Sunak a better chance of an unlikely victory, but a second term for Biden would surely make that harder. This makes getting the timing right for any transatlantic merger or some form of scale up in London challenging to say the least. For our law firm clients, it makes deal timings difficult – markets want certainty, something in short supply at the moment at a political level.
Related, there is clearly a lot of dry powder in private equity and early sentiment for the year has already shown a desire for M&A to make a comeback and for the IPO market in London to reignite – or at least to spark again. I expect we will see a flurry of deals and flotations in Q2 before the summer break and before the uncertainty of the election process starts to kick in this Autumn. So, in the short term, I suspect the transaction pipeline for law firms looks in relatively good shape.”
Gus Sellitto: Founder
Gus: “When it comes to international dispute resolution, we’ll see the continuing development of class actions in Europe with the passage of the Collective Redress Directive. Within this, we can expect to see a growth of consumer organisations and representative groups acting for claimants, and a corresponding growth of third party funding in Europe.
I’m already looking forward to the major dispute resolution events in the calendar this year including Paris Arbitration Week in March and Dubai Arbitration Week in November, as well as London International Disputes Week in June which celebrates the Capital as one of the main dispute resolution centres globally and the very international nature of the disputes landscape today.”
Michael Evans: Joint Managing Director
Michael: “Every year feels uncertain but 2024 has started with more geopolitical tension than most, driven by escalation of conflict in the Middle East, as well as many large economies teetering on the edge of recession. Economic strains are feeding through to the legal and professional services sector, with transactional activity in 2023 hitting a multi-year low and the real estate and private equity sectors impacted by high interest rates. These strains may ease somewhat with rate cuts forecast for the second half of the year but in the meantime the economic context creates impetus for firms to find efficiencies, whether through cost-cutting or deployment of innovative technology such as artificial intelligence.
Reputationally, the Israel-Hamas war has posed questions about diversity, inclusion, human rights and culture that many businesses, including in the legal sector, have been struggling with. We expect to see many firms take a step back from statements about geopolitical events, but there will be tensions between firms and their ever-more online and digital savvy workforces.
In terms of strategic developments, A&O Shearman has shown that big-ticket mergers can be done, but one side needs to see a clear opportunity from the merger and the other a clear threat from not doing a deal. This is the dynamic needed to overcome the difficult hurdles to merging large partnerships across borders. It is not obvious that there are many other obvious combinations with a similar dynamic in 2024 but we will see.
On regulation, financial conduct issues are back, with legal regulators looking closely at potential fraud, misuse of client money and compliance with KYC rules, while the focus on personal and professional conduct has not gone away either. As Beth mentions, the UK’s perennially under-resourced SRA has a phenomenally busy year ahead.
For optimism look no further than disputes and investigations, which have compensated for declining deal activity, with litigation practices booming at most large firms and specialist disputes boutiques alike. We will see continued innovation in the use of litigation funding. While largely a good thing, innovation comes with risk and we have already seen the first big blow up of the year of a firm that was highly reliant on litigation funding. Law firms and funders will need to engage in lobbying to ensure policy-makers and the general public understand and support what they are doing while accepting there will be instances of sometimes messy failure.”
