The legal world is being ravaged by the economic fallout from the Covid-19 pandemic, as lawyers are furloughed, forced to take pay cuts or unable to find work.
Government lockdowns aimed at containing the spread of the virus have forced even elite law firms to rein in their finances as the biggest
In the U.K. alone, nearly 80% of firms plan to furlough some staff and cut partner compensation, according to a study of 200 practices by accountants
“The story is very similar across the world because lawyers are no different,” said Davis, who’s also a partner at London-based Clifford Chance. “They’re providing a service to clients and when they can’t provide that service, they find that law firms suffer.”
Firms and divisions specializing in family, housing and criminal law have been hardest hit due to court cases being delayed and the real-estate market stalling, Davis said. But he warned that things could get worse if
“It’s all about cash flow,” said Jeremy Boyle, managing partner of London-based Summit Law. “The whole world is scared.”
Among the list of high-profile firms to make cuts is
“It is prudent to take pre-emptive action to protect our people and our business,” said Peter Scott, Norton Rose’s managing partner for Europe, Middle East and Africa.
London’s so called
It’s the same grim picture in the U.S. Many big firms there are cutting associate salaries and some are furloughing staff. Many are also announcing large delays or reductions in partner profit distributions.
Baker McKenzie said it would cut the salaries of U.S. lawyers and high-paid staff by 15% starting on May 1, warning that while the length of the pay cuts are unknown they could last through the end of the year. The firm said the pay reductions would help avoid layoffs.
In France, big players such as August Debouzy, Bredin Prat or Gide Loyrette Nouel haven’t made any cuts, in stark contrast to their Anglo-Saxon counterparts both now and after the 2008 crisis.
”We’re very protective of our most treasured good: people,” said Mahasti Razavi, managing partner at August Debouzy. Another reason is that most French lawyers are independent professionals rather than employees.
Still, Razavi said some law firms have decided to postpone the payment of partners’ bonuses owed for the previous year while others have reduced amounts to be paid.
In Germany, the local bar association has called for lawyers to be given frontline status like health workers, allowing them to get benefits such as childcare so that they can do their jobs while the nation is largely shuttered.
The immediacy of the current crisis is the opposite of 2008 where banking woes took time to cascade into the broader economy, according to Jeff Bronheim, a partner at
“From one day to the next
He says his firm has not laid off or furloughed anyone yet and its senior lawyers continue to work on cases but there remains the nagging uncertainty about clients struggling to pay their bills.
“The question is whether the billable hours will translate into bills paid,” said Bronheim. “We will really see the impact in about 6 weeks.”
Amid the gloom there’s an upside for those specialist staff, such as employment and insolvency attorneys, left with the job of sorting out some of the mess left in the
“While it hasn’t gone mad yet we expect to see a tsunami of insolvency,” said Boyle of Summit Law. “A lot of businesses have been caught in the headlights.”
--With assistance from
To contact the editors responsible for this story:
© 2020 Bloomberg L.P. All rights reserved. Used with permission.