News & views
At the time of writing this post in early February 2011 many may believe that the credit crunch is over, that recovery is on it’s way and that the good time will be back soon. In our view, it’s just too early to say and there could still be some more shock waves to come. In truth, the enormous trouble stored up by over a decade of excess and an almost endemic feeling that money borrowed somnehow wouldn’t be money that would ever need to be paid back, has not even really hit yet.
Most major western economies have been propped up and the general population insulated from disaster by record low interest rates, but sooner or later, reality tends to bite. We are also told by insolvency practitioners and divorce lawyers we seak with that insolvencies and divorces are simply being stored up for a time when economic conditions slighly improve. In other words, the problem does not seem to have gone away, just been put off.
A change of mindset
In the aftermath of so many poor and sizeable ecomomic decisions it is no surprise that caution continues to be prevalent in business decison making. Part of this cautious approach, perhaps to be welcomed, is the increased tendency not only to consider the pros and cons of any sizeable or important transaction in financial risk terms, but to look at the people on the opposite side of the transaction. Such wariness has unsurprisingly come to the fore in the wake of the extraordinary Madoff affair. This tends to mean that traditional financial and legal due diligence is potentially not enough, and in-depth business background and reputational risks are becoming increasingly useful and necessary corporate tools.
Effects on legal market
Few people seem to have any sympathy for lawyers and law firms are not the only market sector affected by the credit crunch, but the effect has been severe on this sector. Literally thousands of solicitors in London have been made redundant and the market for conveyancing is on it’s knees. An aspect of this which has not been publicised much is that, in a credit crunch, the big organisations including banks and lenders, tend to close ranks with other larger instititutions, to the detriment of smaller companies, regardless of their performance record. Many of the big lenders will now not allow small practices to be on their conveyancing panels, and this could hasten the anticipated shrinkage in the number of local law firms, exacerbated by so-called “tesco law”. Many people may bemoan the fact that in future legal services could be delivered by bulk suppliers, even in call centres, whereas in our view there is still a need and demand for local legal services in cities such as Liverpool, Birmingham or Sheffield
