Commercial law firms face a sustained era of cost-cutting by in-house legal departments across both the public and private sectors, together with the loss of complex high-end work. This was the message to 100-plus delegates at the Law Society’s 2013 in-house conference, held at Chancery Lane last week.
Nicola Northway (pictured), managing director of Barclays’ competition team, revealed that cost constraints have led the bank to demand cuts ‘on top of discounted panel rates’. Such ‘cost challenges’ were set to change the profession, she added. The bank’s legal spend is estimated to be over £100m a year.
Northway’s message was reinforced by the London Borough of Lambeth’s director of governance and democracy Mark Hynes. The combined legal spend of Lambeth and neighbouring Southwark, Hynes said, is £20m. ‘We are pushing down on our suppliers,’ he added.
That often meant a ‘10% reduction’ paired with the expectation that service and quality levels must rise. The result would be a ‘reduction in external spend’. Hynes also flagged the council’s intention of handling more complex work in-house.
Cost pressures, caused in part by increases in regulation and compliance, were also altering in-house legal departments’ approach to risk management. Graham Vinter, general counsel at BG Group, said corporate counsel needed to talk to commercial colleagues about taking a ‘risk-based approach’ that recognised the impossibility of being on top of every legal issue regardless of contract value.