Considerable drop from net increase of 956 partners in 2018/19
UK law firms saw a net loss of 136 partners in 2019/20*, as coronavirus brought forward retirement plans for older partners and led to fewer promotions.
This marks a considerable change from 2018/19, which saw a net increase of 956 new partners in UK law firms. In the past year, 3,830 lawyers became partners, whilst 3,966 either retired or left to join a new firm.
Many of the lawyers who retired in the past year are likely to have worked in practice areas that were significantly impacted by the pandemic. Lockdown caused court hearings across legal areas such as criminal and family law to come to a near standstill at points. Lawyers at some smaller firms that are reliant on core practice areas such as these, have seen their income drop substantially, causing some to accelerate their plans to retire.
This drop in income is also making it more difficult for some sole practitioners and partners in very small firms to sell their practices at retirement. Prior to the pandemic, many were banking on funding their retirement from the proceeds of these sales.
Given the difficult financial environment, some are choosing to close their firms altogether rather than continue to operate and hope that the right buyer will come along as the economy improves. On the other hand, some firms have seen increased profits over the last year or so, leading to some partners electing to continue working for longer.
As well as bringing forward retirement plans for existing partners, the impact of coronavirus on the economy has also led to fewer associates being promoted to partner level. Firms that have experienced a drop in revenue due to lower demand for services are reluctant to further dilute partner pay by increasing the number of partners.
Andy Harris, Partner says: “2020 has seen a wave of partner departures, as reduced demand in certain practice areas due to coronavirus has pushed some lawyers into retirement. Reduced demand for legal services has made some parts of law firms financially unviable.”
“Lower demand has also meant that many firms have not been in a position to promote associates to partner level, with family and criminal lawyers in particular, hardest hit by the pandemic.”
“The coronavirus crisis has highlighted just how vital it is to plan early so that any unexpected events do not completely derail retirement plans. People who are reliant on selling their firm to fund their retirement should be seeking professional advice several years before they plan on retiring.”
“Nobody could have predicted the extent to which coronavirus would disrupt our lives, but with proper planning, contingency measures can be put in place to mitigate risk.”
2020 saw a net loss of 136 law firm partners, compared to a net gain of 956 in 2019
*Source: SRA, year-end October 2020