Our survey attracted 105 participants, drawn from senior clerks, chief executives and practice managers from around 80 different sets of chambers, which represents roughly 11% of those in England and Wales. There was broad representation from across the Bar with over half of the sets listed in The Lawyer’s ‘Top 30 Chambers’ taking part and 44% of participants coming from chambers outside London.
At first sight, trends in chambers’ revenues appeared to show contradictory messages. On the one hand, only one sixth of chambers surveyed reported a decline in revenues over the three previous years. However, there was near universal agreement that there is pressure on fees, with 99% of respondents reporting that they were under greater pressure than three years ago.
Detailed follow-up interviews were conducted with fifteen respondents on a one-to-one basis and during these sessions it was noted that part of the reason for rising revenue trends at chambers’ level was due to the increase in numbers of members in chambers and that average revenues for many barristers have fallen.
As has been documented by other observers, there are clear differences between practice areas, with criminal and family sets being at the sharp end in terms of pressure on fees and revenue decline. Although we had 105 responses, when this was broken down according to practice areas, it was difficult to draw meaningful detailed conclusions regarding fee pressure for different disciplines beyond this. The various fee pressures cited by respondents included reduction in legal aid, insurers squeezing fees, increased competition in commercial and Chancery practice areas and clients becoming more fee sensitive due to the economic downturn. Ministry of Justice reforms were also mentioned as a general issue.
Although written constitutions were in place in 89% of participating sets, it was perhaps surprising that 11% of chambers apparently did not have a written constitution. Although the survey did not specifically explore the detail within a chambers’ constitution, it became evident during follow-up discussions that there are wide variations in terms of the detail covered. Common issues that arise (and which should therefore be covered in a constitution) include defining what constitutes a majority for voting on various matters affecting chambers.
Business structure has historically not been considered a high priority as the traditional chambers model has been very widely used, whereby all costs and contracts are put through the head of chambers and allocated to members on an agreed format. Where a business structure has been thought about and changes made, half of sets had either a Trade Protection Association arrangement or a service company in place, citing both tax efficiencies and better financial discipline as motivating factors. 17% had ProcureCos, although the extent to which these were used was not clear – some respondents admitted to having arrangements ‘on the shelf’ or ‘on ice’ whilst they waited to see how events played out. This accords with anecdotal evidence of defensive steps by some sets to introduce ProcureCos, even where they may not yet be sure how to use them.
When it came to Alternative Business Structures (“ABSs”), 3% of sets claimed to be authorised as an ABS, while 46% of sets were considering setting up such a structure, which was surprising since the Solicitors Regulation Authority provided licences only from March 2012. Moreover, 22% of respondents appeared to have considered and rejected such an arrangement and 23% not yet considered it. Given this level of interest, there may have been some confusion among respondents between entities authorised by the SRA, and chambers that have a different business model or structure not requiring SRA regulation.
Working with, or against, solicitors
The vast majority of sets saw solicitors as both clients and competitors. Nearly 20% of respondents thought that they would or would have to become part of a multi-disciplinary set within the next five years. The relationship with solicitors was also considered in terms of personnel. Less than a quarter of sets were concerned about barristers leaving their chambers to join solicitors’ firms, although this rose to over half for criminal and/or family sets. Respondents cited the need for income security and a regular flow of work, particularly in anticipation of retirement. Others noted that whilst solicitors might like to join chambers, there were concerns that those solicitors might not have clients to bring with them or that once in chambers they might lose some of their ability to look after clients.
Over 75% of respondents expect consolidation within the profession over the next five years, representing one of our most striking findings. This level of agreement was remarkably consistent across regional and London sets as well as different practice areas of the Bar. Respondents reported a rising trend for barristers, or teams of barristers, moving from one set to another; indeed one respondent likened this to football teams poaching star players from others.
More interestingly, when analysing the response by set size, the larger the size of the set, the more significant the level of anticipated consolidation, suggesting that we could see the larger sets grow still further. Smaller sets were thought to be vulnerable to losing their key members or potentially more likely to merge between themselves, with concerns that very small sets might die out or be ‘swallowed up’. That said, there was some scepticism that bigger sets were necessarily more robust – presumably it depends on the strategic reasons for building a larger set.
Returning to the theme of ABSs, merging with law firms was thought to be problematic due to conflicts of interest and potentially alienating other sources of work.
Growth areas of business
Direct access does not currently seem to be a great source of income. Its potential to generate revenue growth divided opinion, with some seeing it as a time-consuming distraction, diverting attention away from the core skills and services of barristers, whilst others saw it as a significant growth area. The future role of SupplyCos, which could allow chambers to employ their own solicitors to deal with client work, was not reviewed in this regard, but would be an interesting issue to watch in the future.
Licensed access was preferred for those seeking to win corporate work from general counsel, and there were a few sets which had made this part of their strategic aims. Some were considering the general impact on their chambers including how to resource and market themselves.
Today, international work is clearly the preserve of a minority of sets with only six respondents having offices overseas. However, those few seemed to regard overseas work as a growth area, and a further 21% of respondents were considering overseas expansion.
There was widespread appreciation of the uniqueness of the traditional chambers model, which allows access to leading specialists on a very cost effective basis. As might be expected, sets that do not practice criminal or family law appear more confident about the future. However, in sets that practice criminal and family law, and those sets where there are keener commercial pressures, there is a growing sense that muddling through will not be sufficient. A more strategic approach should be high on the agenda.
Background to the survey
Participants in Smith & Williamson’s first survey of barristers’ chambers were asked 20 questions on issues including revenue trends, perceptions of the Legal Services Act, up-take and appetite for business structures, working with or against solicitors, consolidation, direct access and working overseas. Detailed follow-up interviews were then conducted on a one-to-one basis with 15 participants to add qualitative detail. The aim was to take a snapshot of attitudes and activity across different sets, enabling analysis of the results and to allow sets to benchmark themselves and consider the issues on their agenda. In the interests of confidentiality, the project was undertaken by Nisus Consulting who conducted the research in line with the professional code of conduct of the Market Research Society.