Last month’s vote by Criminal Bar Association members to end its long-standing strike ended a period of uncertainty, but its conclusion has created a new set of financial challenges for the legal sector.
With the membership voting to accept a 15% pay rise, questions now arise on how this additional cost will feed itself into the system and how solicitors will respond to the pay rise achieved by their barrister counterparts.
To deal with this growing financial pressure, firms may need to increase fees but they will be concerned over pricing themselves out of revenue through lost business. If not met, questions concerning pay settlements could be the catalyst for staff looking to the future and seeking a new role.
This potential competition over retaining staff could mean firms are left with no choice but to offer greater incentives or improved salaries, at a time when inflation is starting to bite and cost saving is the preferred remedy to financial pressures.
Beyond these pressures, the very method by which the Bank of England is seeking to tackle inflation could also have a significant impact on the sector.
The year began with Base Rate at a stable 0.5%, but 2022 has seen consistent rises with the rate rising to 3% in early November – and market expectations are that this will continue to rise to over 4% in 2023.
Such rises bring with them increased office costs and require rethinking of budgets, with the need to consider potential shortfalls. This may mean that firms require greater support in planning for the months and redrawing plans for the coming years.
I suspect that many firms have started to revise their office costs for the year ahead and are now looking for pragmatic funding solutions to make up for any potential shortfalls and will soon be seeking guidance on how to do so from their financial advisers and accountants.
Many Financial Directors are unlikely to have been working in those 1970s’ inflationary and rate intensive days; this is a new challenge for many. As specialists in providing financial support to legal firms, the team at Iceberg is ready to work with firms to find the right solution for their circumstances.
The combination of higher staffing budgets and increased costs is a challenge firms will rise to – but it is one that could be made easier with the right approach to seeking support and securing funding to ensure operations continue to operate smoothly.
*The views expressed are the author’s and not ICAEW’s.
About the author:
Michael Stevenson is a Chartered Accountant and worked for many years as an Insolvency Practitioner, predominantly for Smith & Williamson, now Evelyn Partners. Since 2009, he has been instrumental in the setting up and managing of the Iceberg business, which provides working capital loans to UK law firms. Since 2017, Iceberg has been part of the Paragon Banking Group.