Accountancy firms are not perceived as big a competitive threat as the traditional legal sector, a survey of law firm leaders has found. The poll of 130 senior executives from top-250 firms found more than two-thirds see current direct rivals as the main source of competition over the next three years.
International firms, niche firms and online service providers were all perceived as a bigger threat than the Big Four's entry into the legal market. Even accounting for respondents’ second choices, competition from accountancy firms lagged behind existing law firms, and was also considered less of a threat than clients' in-house teams.
The legal market report, compiled by financial and professional services group Smith & Williamson, found nearly a third of respondents reporting a significant increase in the competitive landscape, up from just 23% last year. Competitive pressure was felt more keenly in the capital: 94% of respondents from London felt this pressure had increased, compared with 76% across all other regions. This was thought to be caused by the growing presence of US firms in the City.
Since the advent of the Legal Services Act, all the big four accountancy firms have moved into the legal market. The report states that preceptions of threat from this sector have increased this year - but that it still ranks below other competitors.
Tim Adams, partner in assurance and accounting at Smith & Williamson, said it was surprising that current direct competitors are still seen so emphatically as the biggest threat over the next three years. ‘This may be because law firms tend to encounter the usual suspects when competing for work,’ he said. ‘However, take a step back and the greatest challenge may just be emerging.’
Adams said that in the 1990s and early 21st century, accountancy firms had entered the legal market by replicating, and in some cases buying, traditional law firms and their approach.
‘This time, however, the approach is different. Without much fanfare, the big four accountancy firms have now amassed an estimated global fee earner base of over 10,000, using technology to deliver a more cost-effective approach.’
With more competition, retaining the best talent has become increasingly difficult and high-profile moves are more common. As a result, more than half the respondents cited talent retention as one of their top three concerns. The salary gap between top-tier and mid-tier firms is wider than ever before, with the difference in pay for newly-qualified lawyers reaching £23,000.