This was the headline screaming out from the front page of City AM this week http://www.cityam.com/latest-news/legal-firms-hit-fresh-downturn

The main thrust of the news was that Slaughter & May froze associate salaries and Herbert Smith announced 51 redundancies. The lack of corporate deals was cited as the main cause but further restructuring amongst Magic Circle firms was also mentioned.

It also quotes an RBS study that predicts a further 3,000 lawyers will leave the UK legal sector this year and a further 5% headcount needing to be cut for margins to return to pre-crisis levels. This is despite fee income at the UK’s top 100 law firms increasing by 7.2% pa on a quarterly basis (although the previous quarter saw 9.8% rise). The woes of a couple of US firms were also mentioned.

Personally, I was more taken with the less dramatic stance taken by The Lawyer http://www.thelawyer.com/it’s-just-an-illusion/1012366.article which looked at the half full scenario that many firms had promoted more associates than last year. However, the impact of outsourcing and other productivity aids were also thrown into the mix.

So what’s the real story? Personally, I think that the sector continues to make long overdue cuts and changes in the face of weak markets, market restructuring and increased competition. What I’d like to see is a more creative and confident response to creating and growing new markets and services – rather than whittling away at costs that support an increasingly fragile and out dated business model.