04 August 2015
As part of our initiative ‘Driving Economic Growth’ we brought leading legal professionals in Coventry & Warwickshire together to discuss and debate the sub-regional economy and the factors affecting its growth. This report is a summary of the discussion.
The legal sector in Coventry & Warwickshire
The sector is evolving. The traditional culture of hourly rates is increasingly a thing of the past as law firms focus on developing deeper client relationships based on something more than simply the provision of legal services. Adding value is the mantra, firms proactively identifying the challenges clients face and helping to resolve them.
Following the lead of city law firms, firms in Coventry and Warwickshire are shifting from the traditional structure of being led and governed solely by lawyers. Operational boards are increasingly the norm with the firm’s partners being the shareholders to which the board is accountable instead of being the day-to-day managers. This transition means specialists are filling the relevant senior roles, for example human resources, operations and business development directors.
Consolidation, also a current trend, is being driven by a number of factors. Some firms are merging to grow, broadening their skills set and generating economies of scale to capitalise on market opportunities. For others mergers are designed to provide a means of retirement or are in response to the escalating cost of Professional Indemnity insurance.
During the economic downturn many firms cut back on the number of trainees they employed. Now, as the economy recovers and activity in the legal sector gains momentum the consequences of this restriction are increasingly being felt. Firms need talented lawyers who have between one and six years experience post qualification to capitalise on the market potential but there are few available. The resulting battle for talent is proving a growth inhibitor.
To tackle this problem local firms are working to develop their own talent, identifying paralegals with the potential and ambition. This is a longer term solution; of more immediate benefit is the re-training of existing solicitors so they are qualified in more than one practice area.
For a permanent solution, however, the behaviour of Birmingham firms also needs to be countered. They have a reputation for poaching Coventry and Warwickshire talent, tempting it with the promise of higher salaries. A war of escalating salaries is likely to be detrimental in the long term and so an alternative approach is needed. The legal sector in Coventry and Warwickshire has a broad offer that combines career progression, challenging work, flexibility, a good income and a positive work / life balance.
The potential for growth
Within the region a number of industries are performing particularly well, presenting growth opportunities to the law firms and their clients.
Silicon Spa, gathered around Royal Leamington Spa, is a hub for the thriving computer gaming industry and the success of Jaguar Land Rover has supported the development of a hub for design and performance engineering.
Intellectual property (IP) is an important factor in the success of these industries. Funders demand it; it is an essential element of the value of a business. Too often, however, business owners do not recognise the value of investing in IP early on.
Coventry University and the University of Warwick are important drivers of growth, both by creating economic activity themselves and through the provision of valuable graduate talent.
High speed Internet is important for growth and the investment made to transform Coventry into a gigabit city is highly valued. Improving the connection in rural areas is also necessary. The rural economy itself is under-emphasised, the strong food production businesses in the region too often being overlooked.
Undercurrents affecting growth
Brexit: the EU Referendum
A no vote and subsequent exit may not have a big effect of the day-to-day operations of Coventry and Warwickshire’s businesses. A reduction in red tape is likely for micro and small businesses but medium sized businesses are more likely to rely on exports and do not want an increase in trade barriers. Brexit will be also be accompanied by economic uncertainty, which inevitably hampers growth.
In addition, for many businesses the free movement of people is essential for filling a stark skills gap. Jaguar Land Rover and other engineering businesses are particular examples. There are approximately 42,000 engineering vacancies each year and only 16,000 graduates of relevant degrees; immigration is essential for filling the gap.
The Greater Birmingham Authority
The Greater Birmingham Authority will bring with it the potential for investment in specialist business areas and developing hubs such as Silicon Spa.
There is a cultural challenge, however, to accepting the Greater Birmingham Authority; Coventry people are not willing to lose city status. There is also a question mark as to whether Warwickshire and Solihull will be willing to join the Authority.
Access to commercial premises
There may be plenty of commercial premises in and around Coventry and Warwickshire but there is little flexible, high quality office space. This constitutes a barrier to growth as businesses struggle to find premises that will allow them to take the next step.
Access to finance
The number of mergers and acquisitions in the region is growing, but many are still hard to complete. Access to affordable funding remains a barrier to growth.