Jo Hodges, Sales and Marketing Director at Redbrick Solutions shares her thoughts with Today’s Conveyancer about the current economic climate and the impact on the conveyancing sector.
The continued roll out of the COVID-19 vaccines means the UK is now getting some control back over the pandemic. A plan for exiting lockdown is in place and we are all hoping to soon be able to see family and friends, enjoy a meal in a restaurant and get back to some kind of normality, whatever that new normality may mean. Like most businesses, law firms are now turning their attention to how they will work post-covid. The firms that have survived will be looking at their structures, working practices and environment to see where to reduce overheads and the firms that have thrived will look at how they can continue their success, what has helped them succeed and how their business will operate in terms of client retention and winning new business going forwards.
Although it will take a considerable amount of time before we have moved completely out of the grip of the virus, with the current UK lockdown plans now easing, the Government is in a stronger position to plan for recovery and take hold of the devastating impact the virus has had on the economy.
The magnitude of the recession caused by the pandemic is unprecedented in modern times. GDP declined by 9.9% in 2020, the steepest drop since consistent records began in 1948. During the first lockdown, UK GDP was 24% lower in April 2020 than it was only two months earlier in February. Economic activity picked up over the spring and summer, reflecting the opening up of the economy and pent-up demand from the first lockdown. This was followed by a further short-lived lockdown in November. Restrictions were eased, briefly, in December. GDP was 6% lower in December than before the pandemic.
Law firms, and conveyancing firms in particular, will have felt the impact of the first lockdown keenly. Q2 of 2020 had the lowest reported number of residential conveyancing transactions since 2009. But with the re-opening of the housing market, the subsequent SDLT holiday and the reintroduction of 95% mortgages, for the last few months they have been busier than ever, with a 27% rise in transactions from November to December 2020.
According to the latest report by Search Acumen:
“The uptick in demand in the property market resulted in firms benefiting from stronger trading conditions. The number of active Conveyancing Firms continued to recover from the troughs of the first pandemic-induced lockdown, increasing by 58% to 3,808 in Q4 from a low of 2,411 in Q2 2020.
“However, despite the recovery from the early stages of the pandemic and the closure of the UK property market, the number of active Conveyancing Firms in Q4 2020 is still 3% lower year-on-year. It also remains lower than at any point during the pre-pandemic period over the last decade from Q2 2011 to Q1 2020.”
However, the upturn is creating subsequent problems with individuals reporting issues with obtaining mortgages and law firms struggling to cope with the unprecedented demand on staff and resources. Delays from lenders and Local Authorities are significant and are considerably extending completion times.
A recent survey by The Law Society’s Law Management Section suggests that overall firms are forecasting a 10-20% drop in revenue for the 2020/2021 financial year. Economists differ greatly in how quickly they are predicting the economy to recover once lockdown restrictions ease and ultimately end. Some economists predict that a rise in consumer spending will underpin a strong and rapid growth, but others suspect a sharp rise in unemployment will lead to consumers being cautious with their spending and have less disposable income to spend. The average forecast for GDP growth in 2021 is predicted at 4.3%
As the economic extent of the damage that has been caused by covid-19 and the long-term effects and changes to every part of our lifestyle choices, finances and working patterns is largely unknown, law firms will have to continually strive to keep up and remain agile in their business choices. Technology, agile working, and overall working patterns will create the most change to individual law firms and whether they thrive or just survive following the pandemic.
Changes in working patterns post-covid will have an additional impact on the economy with many law firms reducing office space or no longer requiring inner city locations, thus reducing their overheads and asset maintenance. Law firms that have invested in digital systems including case management systems, contact automation and technology assisted analysis tools are likely to be ahead of their competitors and more adapt to working in agile environments.
This move into technology focused agile working will provide new revenue streams for law firms as they are no longer restricted by travel complications, time zones or locations. Now, home working and virtual meetings will lead the contemporary legal landscape. For example, Redbrick now have clients that we have never met. We sold to them remotely, customised and installed our case management solution and trained users remotely. This would have been unheard of prior to the pandemic but it has been very successful, showing that law firms are adapting and embracing the ‘new normal’, and technology solutions are helping them to do that.