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The Biggest Challenges Facing the Legal Profession in 2019

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About The Author

Connor Griffith (Consulting Editor)

Connor is a law graduate from the University of Nottingham with a particular interest in intellectual property and corporate law. He is currently a trainee solicitor at a large national firm, sitting in the Real Estate department. Outside the law, he enjoys stand-up comedy and moaning about Brexit.

© Diliff

There is no substitute for accurate knowledge. Know yourself, know your business, know your men.

Lee Iacocca

Commercial awareness is as vital a skill as ever in the legal world. Tough to define and even tougher to demonstrate, commercial awareness remains in unreservedly high demand from potential employers.

Like clockwork, the turn of the year has given rise to a fresh wave of contemporary legal issues with which aspiring lawyers must get to grips in order to facilitate their transition from student to lawyer. With this in mind, this article forms the newest instalment of Keep Calm Talk Law's popular ‘Biggest Challenges’ series, laying out those matters that applicants must be aware of if they are to succeed in the legal world.

Internal Changes to Law Firms

‘Gig Economy’ Law Firms

Despite what may seem to be the case, the growing trend of ‘gig economy’ jobs – whereby workers are given greater independence to pick the hours they work – is not limited to industries such as food delivery or transport: even the legal profession has not been able to avoid its influence. Indeed, in 2018, there was a 29% increase in the number of lawyers rejecting the typical 9am-5pm career and choosing one in which they are free to opt for flexible working hours. Known as ‘platform lawyers’, these lawyers – of which there are now over 1,000 in the UK – work remotely and operate through ‘platform firms’, marketing themselves and choosing when and where to work.

The promise of greater flexibility has resulted in many lawyers making the jump, particularly those looking to raise children or run a small business alongside their legal career. In addition, platform lawyers are able to retain a greater percentage of their own billings: being self-employed, they have lower overhead costs (for example, as platform lawyers often work remotely, the firms pay less rent) and therefore take a smaller cut of the lawyers’ proceeds. This method of operating offers a potential resolution of enhancing motivation and reducing the steadily growing discord among some arising lawyers who feel underpaid - particularly those bringing large amounts of money to a firm - for the long hours they work.

The result of these benefits, argue platform law firms like Keystone Law and gunnercooke, is that they are able to:

[O]ffer high-quality services at lower rates than many of their competitors.

An End to Cradle-to-Grave Partnerships?

Linked to the growth of platform lawyers is the decline in the popularity of becoming a partner at a traditional law firm. Partnership has long been touted as the pinnacle of success in the legal world and will remain the ultimate goal for many aspiring solicitors. By buying a stake in the firm, one becomes entwined with the very fabric of the firm itself – traditionally, a relationship for life. To become partner at one firm, and then move to another, was tantamount to base treachery.

No longer, however. As the Financial Times noted earlier this year, disruption has been caused – in part – by a change in the way that many companies use, and pay, law firms. Instead of holding one firm on retainer, requiring it to solve any issue that comes their way, many companies are instead hiring in-house lawyers to deal with the day-to-day issues and use ‘outside lawyers to tackle [only] the trickiest and most inimitable challenges’. The result is a greater reliance placed on the most experienced lawyers that firms have to offer – partners – while placing less emphasis on more junior lawyers.

Two consequences arise from this. Firstly, the greater demand for partners to work on the top deals means that greater emphasis is being placed on ensuring firms have a sufficient roster of these experienced lawyers. Difficulty arises, therefore, in the form of an increased poaching mentality amongst the top firms – Magic Circle, Silver Circle and US firms – at which there has been a growth in the number of partners moving from firm to firm.

As such, many firms are finding it hard to tie down their top performers. By rejecting the traditional lockstep method of remuneration for partners (under which partners are paid based on seniority, not by how much business they bring to the firm), some firms have adopted a more competitive ‘eat what you kill’ practice (EWYK), rewarding lawyers with the proceeds of the work they undertake. In firms which practice the EWYK method – or a ‘modified lockstep’ method, which achieves a balance between lockstep and EWYK – the sky is the limit for the salaries of top lawyers. Traditional lockstep firms are struggling to compete.

Secondly, there is a fear that a gap is forming in the conveyor belt of partners, associates and trainees. Traditionally, a fresh wave of lawyers would replace their predecessors as the top dogs of the firm once the older generation retire; if, however, partners are undertaking an increased share of the top work, it can be tough to ensure the younger lawyers are receiving sufficient training. Though partners can pass down certain aspects of the work they receive to the more junior lawyers, clients will be less keen for associates or trainees to deal with the more tricky work for which the client hired the firm in the first place. As such, younger lawyers will not be trained to the same standards as their predecessors, causing concern over the proficiency of the next generation of partners.

Floating of Law Firms on the Stock Exchange

2018 saw a dramatic rise in the number of law firms transitioning from limited liability partnerships (LLPs) to public companies, and thereafter obtaining permission to float on the London Stock Exchange (LSE). Following the introduction in 2012 of Alternative Business Structure (ABS) licences through the Legal Services Act 2007, firms were initially hesitant to take this dramatic step in legal innovation. Gateley Plc became the first UK law firm to float on the LSE in May 2015, raising £30 million and valuing the firm at £100 million.

Since then, there has been a surge of increased activity in law firm floats. Among those law firms who have floated in the past couple of years are:

  • Gordan Dadds floated in August 2017, raising £20 million;
  • Keystone Law floated in November 2017, raising £15 million;
  • Rosenblatt Solicitors floated in May 2018, raising £43 million;
  • Knights Law floated in June 2018, raising £50 million and being valued at £103.5 million, the largest UK law firm float to date; and
  • DWF published a statement in June 2018 that it too was considering floating on the LSE and was expecting to make up to £1 billion, though many doubt whether this figure is realistic.

As with the rapid growth of platform law firms, the increase in the number of firms choosing to float on the stock market demonstrates an emerging trend of firms rejecting the norm and innovating in an attempt to pull ahead of the competition. Of course, such moves are not without risks – Slater & Gordon’s collapse shows that such innovation can go horribly wrong, as previously discussed by this author for Keep Calm Talk Law.

However, such changes in the market are necessary due to increasing bloating and cramping of the legal profession in recent years. Change is needed to keep pushing things forward, lest it risks mirroring the oligopoly of Big Four accountancy firms, which have seen scandal after scandal due to the top firms becoming comfortable and complacent in the knowledge that they audit for 95% of FTSE 350 companies. Such stagnation could be catastrophic for the legal industry, particularly due to the growing threat currently posed by those same Big Four accountancy firms, as recently considered in great detail for Keep Calm Talk Law.

SRA Liberalisation of Legal Services

The combined moral of the stories of platform law firms, a rift in the typical trainee-associate-partner mill, and the floating of law firms on the stock market, is that change is a-coming to the legal profession. The clearest demonstration of this can be seen in the deregulatory proposals made in recent years by the Solicitors Regulation Authority (SRA), the body which regulates solicitors in England and Wales.

In 2013, the SRA introduced its 'Red Tape Initiative', aiming to remove 'unnecessary regulations' and simplify processes in the legal profession. This process was undertaken to:

[R]emove, curtail or simplify regulations and processes which are not demonstrably in the public interest, impeding both those we regulate and our ability to focus on the issues that really matter. This will only be achieved when our Code of Conduct and Handbook contain no more than what is necessary - and what is unnecessary is taken away.

Thus began the liberalisation of the English and Welsh legal profession. Key initiatives under this new attitude include the 2014 abolition of a minimum salary for trainee solicitors, the introduction of legal apprenticeships, and the ability to qualify through the 'equivalent means' process - rather than through a training contract - by proving that the applicant has the 'necessary skills and training to become a solicitor by evidencing [their] achievements while working in other, non-solicitor legal roles', for example, as a paralegal.

In 2015, the SRA also began to focus on replacing the typical route of qualifying as a solicitor - completing the LPC and then spending 2 years as a trainee solicitor - with the infamous Solicitors Qualification Examination (SQE), though the introduction of the SQE has time and time again been delayed. Most recently, the SRA has made it clear that it wished to, as stated by Lawcareers.net:

[R]eplace the current SRA Handbook with a much-shortened set of rules, which would controversially enable solicitors to practise from unregulated firms and freelance solicitors to provide services that were previously reserved for lawyers at law firms.

The intention behind these proposals were made clear by the SRA Chief Executive, Paul Philip:

Freeing up solicitors to work where they choose is good for the profession, opening up career opportunities, and good for the public. It will help to tackle the issue that too many people and businesses simply cannot afford to access the help of a solicitor when they have a legal problem. Removing restrictions on where solicitors can work will give the public more choice, increasing access to high quality legal services at a price they can afford.

However, such proposals have proved unpopular with many in the legal profession. The Law Society was particularly scathing of the proposals, with Robert Bourns - its president - stating:

The SRA’s role is to regulate solicitors to ensure consumers are protected – yet here it is opening the door for some solicitors to work in unregulated entities, sweeping away long-standing rules referencing conflicts of interest, proper professional indemnity insurance and access to the compensation fund (underwritten by the profession) so if something does go wrong consumers could struggle to recover any losses.

Likewise, roughly 70% of small- and medium-sized firms are worried that the liberalisation would make it tougher for them to compete with, and distinguish themselves from, unregulated solicitors. In addition, firms are concerned that the further introduction of a relaxation of the rules is demonstrative of the next step in a race to the bottom, gradually decreasing standards - and, therefore, trust of the public - in the legal profession as a whole.

As a result, the Legal Services Board (LSB) 'received unprecedented lobbying' against the SRA's proposals. However, the LSB approved the SRA's proposals in November 2018 - while recognising that permitting legal services to be provided by unregulated firms 'presents some potential risks', LSB chair Helen Phillips did not believe that those risks created 'compelling grounds for refusing the proposal'.

2019, therefore, will likely see the introduction of 'one of the most radical shake-ups in recent years'. Greater competition - at a time when many clients are already changing the ways in which they hire firms - will require many traditional firms to change how they act and charge, or else risk being left behind. Indeed, as argued by Harvard Law School lecturer Heidi Gardner when speaking to The Lawyer:

2019 will be the year of the ‘hourglass’… The firms at the top will [remain competitive] by solving their clients’ most sophisticated problems, which, in turn, will produce a virtuous cycle of profitability, client retention, reputation and talent attraction. The law firms at the bottom will optimise value by leveraging and integrating technology to provide cost-competitive commodity work. My prediction is that the law firms in the middle – the ones that fail to adapt – will be squeezed out.

The Crumbling Criminal Justice System

For years, the English & Welsh criminal justice system (CJS) has been teetering precariously on the brink of collapse. The question of its mortality has pervaded the minds of lawyers and politicians for many years, with repeated funding cuts to the police, Crown Prosecution Service (CPS) and Ministry of Justice (MoJ) resulting in the CJS becoming little more than a hollow shell of its former self. Indeed, the system, which the late Lord Bingham described as once being considered ‘without peer in the world’, is now merely ‘hanging on by fingernails’.

The statistics tell a depressing story, particularly for a time when crime is continuously on the rise regardless of how many people are imprisoned.

Severe cuts to funding began in 2010, following the 2008 financial crisis. Between 2010 and 2017-18, the budget of the Ministry of Justice was slashed from £10.9bn to £7.6bn, and is expected to fall further to just £6bn by 2020: a 40% cut in real terms. Since 2010, the CPS has lost almost a third of its workforce. The number of English and Welsh police officers fell by 19,921 (14%) between September 2010 and September 2017, with there being an estimated 20% cut in police funding in real terms during that time. Only around a third of the trials listed in 2015 were deemed ‘effective’, i.e. they went ahead as planned on the day they were originally scheduled. Due to continuous postponements, a mere 55% of ‘people who have been a witness or victim would be prepared to act as a witness again’. Finally, the Legal Aid Agency spent ‘£93.3 million during 2014-15 on defence counsels to represent defendants whose cases never went to trial’.

Amongst all of these failures, nowhere is the situation more dire than legal aid funding. The infamous Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which came into force on 1 April 2013, introduced vicious limitations on the availability of legal aid in many areas of law, such as family law and employment law disputes. LASPO, which has reduced the number of people eligible to receive legal aid by ‘80% in eight years’, was introduced in order to ‘reduce legal aid spending by £350m’. It is clear, however, that this arbitrary target has been met, exceeded and left in the dust. Between 2010-11 and 2016-17, the amount spent on legal aid dropped an alarming £950m in real terms, from £2.5bn to £1.55bn. Likewise, in 2012 there were ‘nearly 574,000 civil cases involving legal aid starting in England and Wales’, a figure that dropped to just over 140,000 in 2017-18.

Multiple consequences have arisen from these cuts. The most predictable – though by no means less serious – is that there has been a sharp rise in the number of citizens having to represent themselves in court, known as ‘litigants in person’. Unaccustomed to the expectations of the legal system, this experience can be truly daunting and – in situations where a person is having to represent themselves against a hired barrister on the other side – downright cruel. As argued by barrister Sarah Langford, author of legal memoir ‘In Your Defence’:

People want [the legal process] to be fair, they want to be heard. But how can it be fair when they’re completely outgunned?

Secondly, Schedule 7 of LASPO abolished ‘defendant’s costs orders’, which ensured that those that were charged with a crime, hired representation to defend themselves and managed to prove their innocence, were able to recover ‘reasonable costs’. Now, however, even if a defendant is acquitted, they may only recover legal fees from the government equivalent to legal aid rate. Anonymous barrister ‘The Secret Barrister’, in their prominent 2018 book Stories of the Law and How It’s BrokenKeep Calm Talk Law’s review can be found here – refers to this tragedy as the ‘innocence tax’ and apprises the reader of tales of ‘acquitted defendants forced to sell their homes and exhaust their life savings’ simply to correct this mistake made by the government. A particularly high-profile example of the innocence tax in action occurred in 2014, when Conservative MP Nigel Evans – who had actually supported LASPO when it was passed in 2012 – was forced to spend £130,000 ‘defending himself against false accusations of rape and sexual abuse’. He summarised the situation succinctly:

LASPO financially punishes innocent people for the crime of being wrongly accused.

For years, there have been calls for a review of LASPO, which ministers initially promised would occur within ‘three to five years’ of enactment. These reviews, however, have been continuously delayed: most recently, despite initially stating in May 2018 that the review would be conducted before the end of 2018, justice minister David Gauke recently confirmed that this target would not be met, and that the review can now be expected ‘early in the New Year’. What's more, the government announced on 11 January 2019 that its 'broader review into criminal legal aid fees will not be ready until late 2020', despite concerns that poor pay for criminal duty solicitors is causing many to leave the profession. Behind these postponements and delays are thousands of civilians that are not receiving the legal representation they are entitled to.

Further dissatisfaction arose following the introduction of the ‘Advocates’ Graduated Fee Scheme’ (AGFS) in 2018. Under this scheme, the remuneration barristers receive for their work on legal aid cases is linked, rather than to the actual amount of work done on the case, to the complexity of the type of case they take on – namely, representing a murder will automatically earn the barrister more money than a theft. This, the continuous cuts to legal aid funding, and the crumbling state of the CJS overall, resulted in many barristers refusing to take on new legal aid cases, or cover colleagues unable to attend their present cases, for several months in mid-2018. As a result, the government offered an additional £15m – later increased to £23m – to fund the most serious criminal trials under the AGFS, but this proposal was only narrowly accepted by practising barristers (51.55% voted in favour), demonstrating that animosity towards the government still lingers amongst many in the legal profession.

This investment, however, is insufficient to resolve the underlying issue of the CJS. While the Ministry of Justice announced in December 2018 that it will be conducting a ‘wider review of criminal legal aid payments’, it’s painfully apparent why the CJS is failing: the severe cuts to funding, with more on the way, has hampered the ability for proper justice to be done. As articulated by the Secret Barrister, the government’s determination to assure citizens that the full digitisation of the CJS will save the system is misplaced; only a return of the funding taken away in the last decade can ensure justice is once again seen and done.

As a result, 2019 will likely see an increase in the strain placed on the CJS, the frustration of the lawyers being expected to work harder for gradually decreasing pay, and – particularly if the LASPO review is completed – a wide array of arguments surrounding the current state of legal aid.

Gender Equality

2018 was quite the year for women. After Lady Hale was appointed as the first female President of the Supreme Court in September 2017, the highest court in the UK had a female majority for the first time in history in October 2018 – demonstrating that, while women are still under-represented in many of the top spots (e.g. partners), the hurdles placed in front of women achieving these positions of authority are gradually being removed. Indeed, the SRA reported in March 2018 that, while women made up ‘59% of non-partner solicitors compared to just 33% of partners’ in 2017, this latter figure – up from 31% in 2014 – demonstrates a slow but steady march towards 50%.

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 required companies with 250 or more employees – therefore implicating many large law firms – to publish details of gender pay gaps highlighted how, even now, there is a significant disparity between how male and female lawyers are remunerated: White & Case, for example, reported in December 2018 a ‘mean gap of 64.8% across [its] entire headcount’ of employees (including partners).

Thirdly, law firms were not immune from the remit of the #metoo movement. A multitude of reports of inappropriate behaviour – predominantly by male partners in large firms – has resulted in regulators ‘struggl[ing] to deal with a backlog that will take up to three years to clear’. It is promising that the current social climate – one which does not tolerate such heinous, opportunistic acts – has given women in law the confidence to stand up for themselves, rather than, as was previously the case, shrinking back in order prevent themselves being ‘labelled a troublemaker, someone who is not part of the club’.

Hopefully, 2019 will see a continuation of these trends: greater opportunities for deserving women, greater movements paid towards equality in remuneration, and a stricter attitude towards inappropriate conduct by those previously thought of as too powerful to fall.

Brexit - The Spectre of a No-Deal

Finally, thought must be given to Brexit. It has now been roughly 30 months since the fateful vote of the UK to leave the European Union (EU) in June 2016 and, despite being so concerningly close to the 29 March 2019 – the day on which the UK is, currently, scheduled to leave the EU – there is still no concrete plan setting out for the terms on which the UK will leave. No-Deal may end up becoming the UK's approach by default.

The spectre of a No-Deal hangs over the legal industry: the possibility of it undoubtedly terrifies UK law firms. Assertions by prominent pro-Brexit politicians that leaving the EU without a deal is ‘better than a bad deal’, and that any points made to the contrary are simply lies conjured up under ‘Project Fear’, are indecisively false. The Law Society reported that no-deal would halve growth in the legal sector, causing a £3bn loss; similar outcomes inevitably await a myriad of other sectors.

Indeed, Christina Blacklaws stated in August 2018 that:

Brexit is likely to have a significant negative effect on the legal sector in the medium and longer term. This is largely due to the knock-on impact of Brexit on the wider economy as demand for legal services relies on the success of other sectors of the UK economy.

This paints a gloomy picture: even though we have not even left the EU yet, ‘[b]anks, insurers and money managers are planning to move about [£800 billion] of assets from the UK to the rest of Europe’ due to the uncertainty surrounding Brexit.

Therefore, while firms have initially been able to capitalise on Brexit – as reported in the 2018 Biggest Challenges article, they have been ‘tasked with explaining the effect of Brexit on huge numbers of existing contracts and transactions across many areas of law’ – if we, as a nation, insist on going through with Brexit, the consequences affecting the legal profession, and those on which it relies, will be much more dire.

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