Economic downturn impacts Welsh firms

Law firms in Wales, from big commercial firms to rural high street practices, are waiting to see just how they will be affected by the turmoil afflicting the wider UK economy. ‘No one is immune to what is happening but there aren’t the extremes here,’ says Alan Meredith, senior partner of Eversheds’ Cardiff office. ‘We don’t see the top but we never quite see the bottom.’

With 431 fee-earners – more than twice the size of the next biggest firm Hugh James – Eversheds is by far the biggest firm in Wales. It is one practice to have already felt the effects of the credit crunch, though. Nationally, the firm has made 33 redundancies, three of them legal advisers from the Cardiff office’s real estate team.

But Meredith is hoping those will be the only ones. ‘The three were out of a total of 69 in our real estate team. It was very regrettable but it reflects what is going on in that market. Who knows what will happen with all the dire news, but we have done our homework and, at the moment, that is the extent of the job losses.’

Redundancies are ‘popping up here and there, but we haven’t yet seen any departments being shut wholesale’, says Mark Harvey, President of Cardiff Law Society. ‘But, sadly, no one is insulated from the credit crunch. The larger firms have been through two or three very successful years with a lot of investment in Cardiff and Swansea but, like everyone else, we will start to feel the squeeze.

‘A lot of smaller practices in both south and north Wales are already struggling. There is less and less residential conveyancing, while the legal aid reforms are causing major problems,’ adds Harvey.

Jeff Pearson, chief executive of Geldards – one of the four big players in Cardiff, which also has offices in the East Midlands – says: ‘I cannot believe that, with the seismic events over the last few months, there isn’t going to be a major impact on every part of the country.

‘I was fairly cautious doing the budget this year. Some managing partners and chief executives were setting budget growth targets of 8-10% and then trimming them to 6%. I thought that was insane. We built into the budget a 2% fee income growth and, at the moment, we are performing to budget. I would be perfectly happy to do next year what we did last year, which was £24.6m.’

The ability to be flexible is vital. Harvey, who is head of the harmful products group at Hugh James, says: ‘We are all reasonably busy in corporate and commercial but everyone is seeing the property side slow up. But, ironically, this last month our bulk remortgaging section has had more instructions than in its entire history.’

Rosemary Morgan is senior partner of Swansea-based commercial firm Morgan LaRoche, which she and eight others set up in 2002 after leaving national firm Morgan Cole, one of the big commercial players in Wales. ‘We wanted to release ourselves from all the bureaucracy and be able to offer services flexibly and quickly – which is very important in this time of the credit crunch.’

So far her firm, with niche areas including commercial and retail property and regeneration work, as well as an international client base, remains busy. ‘I have worked through four recessions and have never been without work,’ she says. ‘You just have to be ambidextrous. But I fear for some of the smaller high street practices who are reliant on legal aid and residential conveyancing, particularly as a lot of them are my generation.’

But there is also a buzz to Wales, which has seen Cardiff and Swansea revitalised, with thriving universities and major city centre regeneration projects. The Millennium Stadium and Millennium Centre pictured attract top sporting and cultural events. Looking ahead, the Ashes cricket will be coming to Glamorgan next year, while the Ryder Cup will be based in Newport in 2010.

Leading regeneration

While most of the business in Wales, apart from agriculture, is done along the M4 corridor from Newport to Swansea, the big commercial players all attract high-profile national and international work. There is also plenty of public sector work available through the Welsh Assembly and the 22 local authorities, while Wales leads the way in regeneration. Biosciences is another growth area as Cardiff and Swansea universities set up spin-off companies based on their research projects.

Cardiff inevitably dominates as Wales’s capital and its largest city, contributing a fifth of Welsh GDP. Companies including British Gas have opened contact centres in the city. It also has the UK’s largest film, television and multimedia sector outside London – the BBC’s hugely successful Dr Who and Torchwood series are filmed in Cardiff.

Meredith highlights the benefits of being in Wales. ‘It is an area of devolved government, with lower overheads and salaries than in London and English provincial cities. Cardiff may be the youngest European capital city, but it can compete with any of the others and it is important that everyone keeps punching above their weight.’

For Harvey, a Londoner, Wales has changed profoundly over the last decade. ‘I have lived here a long time and, while I feel I work for a national rather than a Welsh firm because of the work we do, I am proud we are Wales’s largest indigenous law firm.’

Maintaining a Welsh identity is a vital differentiator. ‘It is very important,’ says Brian Dawson, senior partner of general practice Walker Smith Way, which has offices in Wrexham and across the border in Chester, where he is based. ‘We have several Welsh speakers, though it is of some embarrassment to me that I am not one of them.’

Despite the international and national nature of their work, Meredith says Eversheds’ Cardiff office has a Welsh identity dating back to the beginning of the 20th century. ‘While we don’t trumpet it, we have lots of Welsh speakers and can conduct legal business in Welsh.’

Pearson says his colleagues in the East Midlands would be a ‘bit miffed if I described us as a Welsh firm. Cardiff is where we started but we regard ourselves as a regional firm. However, we have a number of Welsh speakers and Welsh-speaking clients, such as S4C’.

However, for Richard Norman, head of Leo Abse & Cohen’s claimant PI department, their ‘Welshness’ is a key part of their marketing. ‘We have been running some television adverts with the final line stressing that we are "personal injury lawyers for Wales" to make us stand out in what is a very competitive market.’

As in England, there is a north/south divide, largely because of accessibility – it is easier to drive to London from Cardiff than it is to drive to North Wales, complained one practitioner. The market is also different, with far more people in South Wales compared with the more rural North Wales.

Geldards opened a small office in North Wales but found many of the businesses in the north-west already had long-standing relationships with law firms across the border in Liverpool, Chester and Manchester. ‘We were hoping to generate local work, but it didn’t happen, so it became uneconomic to carry on,’ Pearson says.

While the economy inevitably remains the major talking point, there is also huge concern in Wales over access to justice.

Leo Abse & Cohen, with 12 partners and offices in Cardiff, Swansea and Newport, was set up by Leo Abse, one of the leading social reforming lawyers and politicians of his generation who died in August, aged 91.

The firm decided last year that it could no longer go on providing family and criminal legal aid. Norman says: ‘It just wasn’t viable. It was a decision we made with great regret, but it was taken in the knowledge that our core business still focuses entirely on the individual.

‘We have managed to cope with the downturn in the residential conveyancing market by relocating staff to different areas. As long as we concentrate on our core business of representing trade unions, PI claimants and private clients and look to target growth in areas that are compatible, such as litigation, we will get through this. I don’t think it is a time to experiment or take chances.’

Community advice

For those firms that still offer legal aid, attention is focused on the Legal Services Commission’s plans to set up a community legal advice network (CLAN) to cover Cardiff, Bridgend and the Vale of Glamorgan.

Roy Morgan, chair of the Legal Aid Practitioners Group, says the plan could result in organisations working more efficiently, with better referral arrangements. But the scheme could eliminate a lot of very good practices, both private and not-for-profit. The tenders are expected to go out in December for the CLAN to start next October. But funding is an issue, says Morgan, as it involves three local authorities, which are understood to be having second thoughts.

His firm Morgans is the biggest social welfare provider in Wales. ‘We are talking to other organisations about forming the CLAN. I have reservations about losing good providers but if you aren’t in it, you are out.’

Technically, Morgan is a sole practitioner, though he has 102 employees based in four offices – two in Cardiff, one in Swansea and one in Milford Haven, and outreach facilities in 14 areas. His firm also runs the community legal advice telephone service, formerly CLS Direct, in Wales, with 18 caseworkers taking several thousand calls a month.

Earlier this year, Morgan recalls, there was a tender round in eight regions for family work. ‘We were surprised when we were offered all eight, but we only took up seven – the rates being offered for north-west Wales were ludicrous.’

Overall, he says: ‘We are massively committed to legal aid. But we have made the decision to reduce the portion of our £3-£4m turnover that is dependent on legal aid from 85% to 60-65% over the next three years – not by reducing legal aid work, but by building up and promoting the private side.’

One of the things closest to his heart, he says, is where the next generation of legal aid lawyers is going to come from. ‘It is very difficult to find young solicitors on the social welfare side. We have a policy of growing our own by taking on paralegals and then giving them training contracts. We have eight trainees and keep the majority on.’

Walker Smith Way, established in the 1830s, is one of the largest general practices in North Wales, with 28 partners and offices in Wrexham and across the border in Chester. It has a substantial PI and trade union practice, as well as commercial property and dispute resolution departments.

Senior partner Brian Dawson, who co-ordinates the Association of Personal Injury Lawyers in Wales, says there has been a substantial downturn in the residential conveyancing market in Wrexham, but they are not making redundancies. ‘We have swapped a couple of people around internally, but the idea of a general practice is that when there is a downturn in one field, the firm can tick over based on its other disciplines.’ David Rudd, the firm’s head of clinical negligence, says they have had to pull out of doing legally aided family work but remain committed to legally aided crime and clinical negligence.

‘We don’t want to cherrypick cases, but we are making a loss on every case where we do a legal advice matter that doesn’t progress to a successful outcome.’

In North Wales, the five-partner firm Parry Davies Clwyd-Jones & Lloyd has four offices, including two in Anglesey. Partner Nia Wyn Lloyd says they are ‘very much’ a high-street firm. They have legal aid franchises in family and crime, which they can only continue because they have such a mixed base of work.

‘These are turbulent times,’ she says, ‘but we haven’t hit the low here yet. We may be cushioned, in that while we don’t see the highs city firms do, we don’t see the lows either. But it is too early to tell.’

Halsbury’s rubric of ‘for Wales, read England’ no longer applies, says Peter Davies, former president of the Associated Law Societies of Wales, which represent more than 3,500 solicitors.

Davies, who set up his own niche litigation practice in South Wales in 1998, says: ‘The Welsh Assembly has had an extensive impact, which is good for Welsh firms as it generates more work.’

A recent survey by Aberystwyth University found widespread support for devolution, although Plaid Cymru’s long-term goal of an independent Wales was only supported by 10% of the 2,500 respondents.

So what impact has devolution had on the legal market? Mark Harvey, chair of the Cardiff Law Society and a partner with Cardiff-based Hugh James, says: ‘These are interesting times. The Welsh Assembly Government is starting to have more of its own powers to make its own laws, so firms will increasingly have to be able to give advice on both English and Welsh law.’

In a significant move earlier this year, the Assembly set up its law firm panel for the next four years with five sections – property and commercial, employment, corporate finance, litigation and environment – which covers the work of a wide range of bodies, including the Welsh Assembly Government, the Countryside, Sports and Arts Councils for Wales, and the Care Council for Wales.

Alan Meredith, senior partner of Eversheds’ Cardiff office, which is represented on four of the five panels, says: ‘The public sector is huge in Wales, not only with the Welsh Assembly but also because Wales has 22 local governments, all of which have large in-house teams of lawyers. It was highly competitive to get on the panels and everyone has to fight for the work they get.’

What has been exciting, says David Rudd, head of clinical negligence in Walker Smith Way’s Wrexham office, has been sitting on the legal advice committee, looking at the first Welsh Assembly Measure, or act, which outlines a free-to-all redress system for the NHS in Wales, something which hasn’t yet got off the ground in England.

Rudd says: ‘It is anticipated that the regulations will be written over the course of next year, with the scheme coming into effect in 2010. The proposed remuneration package for solicitors is reasonable. We could recover more if we went to court and won, but this way you are paid, win or lose.’

For Brian Dawson, senior partner of Walker Smith Way, the big issue is the court jurisdiction. Wales has parted company from Chester as a circuit. He is concerned that not enough investment is being put into the court service in North Wales and the area will lose influence. ‘What should happen is that Wales should invade Chester and then we would all be happy,’ he jokes.

Harvey says there is the concept of ‘Legal Wales’ where everything Welsh should be determined in the Welsh courts, particularly judicial reviews, which historically could only be heard in the High Court. ‘It is daft, everyone trooping off to London,’ he says.

According to HM Courts Service it is hoped that, from April next year, all reviews arising in Wales will be heard in Wales. A spokesman says they are investing in the courts, with a new Crown Court in Caernarfon and a new county court in Newport opening next year. There has also been major refurbishment of the combined courts in Mould and Merthyr, and there are plans for a new combined court in Aberystwyth and a new magistrates’ court in Newport. About 20% of judges are Welsh speakers and some appointments require judges to be bilingual.

While Meredith says the jury is still out on whether Wales should become as distinct in its legal framework as Scotland, Richard Norman, head of personal injury at Leo Abse & Cohen, says the Welsh Assembly has given Wales a new feeling of self confidence.

Or, as Dawson puts it: ‘People tend to refer to Wales as a region. What they forget is that it is a country.’

Grania Langdon-Down is a freelance journalist