Comment: Brexit and the Legal IT sector impact.

by Andy Stokes, Director – Andy Stokes Consulting Limited

Brexit! Shock and horror! The end of the world as we know it.

Well not quite, but there can be little doubt that the UKs referendum decision is having and will continue to have an impact on the economy, and that the London centric professional service industry was largely in the Remain camp and somewhat taken aback by the Leave vote. And when the economy catches a cold then law firms start to sneeze and the germs then start to spread over to the Legal IT sector. So how could Brexit affect the Legal IT sector in the short and longer term?

Will reduced immigration and an economic downturn force Charles Christian to be out crop picking in the Fens? Will Richard Susskind produce another volume of Hey – here’s why lawyers are doomed! Will I be reduced to writing COBOL again, this time under a French nom de plume for banks in Paris?

Firstly, let’s consider what many commentators are saying about the legal sector. The consensus appears to be that law firms will experience an upturn in inquiries regarding the impact of Brexit, translating into short term advisory opportunities, but that in the medium term transactional work will inevitably be adversely affected, mitigated only slightly by work undertaken as clients reposition themselves and the future shape of the UK’s trade relationships begins to be known. And then finally we will settle into a new, and as yet unknown, normal.

Unfortunately it will be very difficult for the Legal IT sector to take advantage of the short term advisory opportunities, as law firms will be very busy both dealing with clients and thinking about their own medium and longer term futures, and almost inevitably this period of time will not be one where firms are really thinking about in freshly engaging with the Legal IT sector. Indeed, there is an argument to be made that many firms will almost certainly be looking to reduce discretionary spend as a knee jerk reaction to future economic uncertainty.

The longer term outlook will be quite interesting and will I think be a bellwether that could inform us as to exactly how much law firm leadership has really changed in the last 10 years. Or not, as the case may be.

Consider the following; after the surprise 2008 global ‘crisis’ many firms took action to lay off staff and reduce costs, including Legal IT costs, and it can be argued that this helped firms to survive the downturn. Equally it can be argued that the only firms that ‘went under’ during this period were those that were seriously mismanaged anyway, and that most firms would have survived, albeit with somewhat reduced profitability. However there can be no denying that jobs were lost and people suffered and many would argue that this was done on the altar of maintaining profitability rather than ensuring survival.

Moving forward to the last few years however we have seen investment and innovation apparently being embraced by law firms as they seek to cope with the challenging circumstances brought about by globalisation, the 2008 ‘crisis’ fallout, Jackson reforms, sustainable cost reduction, ABAs and the new IT landscape of AI, SSaS and ‘the cloud’… plus others. In many ways Legal IT has been an enabler in this, and there have been undoubted opportunities for the sector as law firms have realised that not changing in a changing world is really not an option.

So, on the one hand we can see that Partners can be very protectionist, insular and isolationist, and on the other that they can be expansive and forward thinking. It will be very interesting to see which way the pendulum will swing as they strategize coping with Brexit, and either way the undeniable driver will still be the preservation of profitability. However it will be the focus on either the short or long term that will be the telling factor. If it’s the short term then we’re in for job losses and knee jerk reactions which will impact the Legal IT sector adversely. If it’s longer term then there may well be opportunities for the sector as the legal industry adapts to changing circumstances which they have gotten used to dealing with.

In this particular case I think and fervently hope that longer term rational thinking will win out. Why? Because of two reasons; firstly because unlike the 2008 economic ‘crisis’ Brexit did not come ‘out of the blue’, we knew the referendum was coming and knew it could lead to a leave vote; certainly every firm I work for has been planning for the unexpected already. Secondly, it comes at a time when firms are coping with immense change already; yes Brexit leads to additional uncertainties, but it’s at a time when change is already happening and actually being embraced and planned for, when law firm partnerships have their heads on the longer term already.

The alternative that I hope does not transpire is one whereby narrow minded self-interest prevails, whereby we see law firm partners’ act in the very short term and to the detriment of others, thus furthering a dis-United Kingdom of ‘haves’ and ‘have nots’ at a time when the UK needs to pull together for the benefit of all. But I’ll remain optimistic, and so hopefully a combination of preparedness and of having a pre-existing mind-set of dealing with constant change for the future will prevail, and opportunities will continue to be available for the Legal IT sector.

After all …”the only thing we have to fear is fear itself”. Otherwise I might just be joining Charles out in the fields come harvest time.