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Snippet
Banks on London’s Fleet Street – located amid the country’s highest concentration of law
firms (large and small) and the barristers chambers of Inner and Middle Temple and
Lincoln’s Inn – are closing their doors and reducing hours of business. Lloyds’ magnificently
ornate branch opposite the Royal Courts of Justice shut last year. Barclays has two
branches, both operating on reduced hours. At HSBC, most staff are to be found towards
the rear – past an atrium containing many machines.
Neither the presence of magic circle firm Freshfields Bruckhaus Deringer, nor sole
practitioners on Chancery and Fetter lanes, has stopped the decline of bank branches on
this famous thoroughfare.
This is, of course, the way UK banking is going – lawyers are not being singled out for
worse provision. For many individual account holders, it has been decades since they saw a
branch or account manager in the mould of Dad’s Army’s Captain Mainwaring – a controller
of credit who knew his customers.
Business customers, including law firms, had a longer reprieve. And with the law firm model
relying on ‘work in progress’, it was in the
banks’ interest to take time to understand legal business; these were, and are, low-risk
businesses with a regular need for credit. Overdrafts and loans remain core to what law
firms need from their banks.
They should be a good credit risk, too. Even in the most traditional of partnership structures,
regulatory commitments ensure a high degree of transparency around financial stability
(some high-profile firm failures not withstanding).
Law firm accounts and business plans are also pored over most years by brokers and
insurers, as practices move to buy professional indemnity insurance (PII) (see PII feature,
page 18).
An understanding
Yet, to varying degrees, many major retail banks have placed the services they offer to law
firms within bigger, more general departments. This is happening at a time when some
areas of law are viewed by lenders as ‘high-risk’.
‘For me, it’s all about knowing the sector,’ says Chris Marston, former head of professional
services at Lloyds and now CEO of law firm network and consultancy LawNet. ‘There are
plenty of bankers out there who understand how to support SME businesses, but the
peculiarities of the legal sector baffle them.’
Are the banks paying sufficient attention to the legal sector economy? ‘The four main
banks are showing different levels of interest in the sector,’ observes Viv Williams,
consulting director at Symphony Legal. ‘The two with the largest market share, NatWest and
Barclays, have around 60% of the law firm market yet seem not to want to grow.’ Their
market share has fallen from an estimated 65% in the past few years, he estimates.
From his vantage point – providing advice to SME law firms – Williams adds: ‘NatWest and
RBS have the greatest exposure to personal injury and clinical negligence [practices], and
are squeezing clients to reduce their borrowings – some on a monthly basis – which [has]
exacerbated the position.’
A classic case, perhaps, of a business feeling the bank ‘owns’ them, rather than firms being
valued customers with a choice?
Shop around
Feedback from principals at smaller practices suggests that firms should still be confident to
shop around.
Tony Roe, founder of Tony Roe solicitors, recalls: ‘I set up my Berkshire-based niche
divorce and family law firm 10 years ago. Before I could open the doors I wanted to get the
right relationship with a bank. So I interviewed several contenders. It was rather
empowering, if not a little daunting.’
Marston agrees that shopping around is desirable when choosing – or changing – banks:
‘Law firms should ask their banks if they have invested in creating a specialist team which
keeps up to date with sector developments. Can they hold a conversation about the
regulatory and competitive environment? Have they received any training or external
accreditations or ongoing development to help them support their solicitor customers? And
there are obligations the other way around, too.’
Loyalty to banks is high in the UK, both from individuals and businesses. Each often sticks
with the bank they start out with. But that relationship can change on either side. And if it is