updated on 24 January 2023
Commercial awareness is a vital skill for all lawyers. For candidates applying for vacation schemes and training contracts, becoming commercially aware involves building an understanding of how law firms and their clients work as businesses, and how the wider world impacts them. This guide rounds up a range of commercial stories and talking points from 2022.
Reading time: 18 minutes
Keeping up with current affairs and thinking critically about what you watch, listen to and read are important habits to develop. Solicitors need to know what’s going on in the world to consider how it might affect their firm and clients. As an applicant, you’re not expected to be an expert, but you must be prepared to hold a conversation with a panel of partners in an interview.
The last year has been a particularly significant year for Britain; we emerged from the pandemic hoping for a steady return to normal, but instead it’s been quite turbulent. We celebrated Britain’s first Platinum Jubilee and a royal funeral all within three months; we’ve had three prime ministers; there’s a war in Europe; an energy crisis; record high inflation; strikes; and Twitter now belongs to Tesla billionaire Elon Musk.
Let’s break down the top stories that made headlines in 2022 and consider what you should look out for in 2023.
On 8 September 2022 Queen Elizabeth II, the UK’s longest-reigning monarch, passed away at the age of 96. Having served the country for 70 years, she’s also the second longest-reigning monarch in world history, surpassed only by Louis XIV of France. The Queen is succeeded by her son, King Charles III who, at 73, is the oldest person to accede to the British throne. But what does a new monarch mean for the UK?
From Queen’s Court to King’s Court
Senior barristers who were once known as members of the Queen’s Counsel (QC) have had their post-nominal letters of ‘QC’ changed to ‘KC’, meaning ‘King’s Counsel’. Within the Royal Courts of Justice in central London, senior judges now sit on the King’s Bench. Criminal prosecutions in the UK, that were once conducted in the name of the Queen, will now change to the King. Where once official documents put the defendant against ‘the Queen’ or ‘Regina’, they’ve now been switched to ‘the King’ or ‘Rex’.
However, this change in address may be a moot point, given that The Times reported the number of barristers appointed to KC has significantly fallen for the second year in a row, with just 95 becoming QCs or KCs in 2022 – a 20% drop from 2020. Reasons for such a sharp decline are attributed to:
Monarchy in decline?
When Elizabeth II was crowned in 1953, the monarchy was seen as a symbol of excellence across Britain and much of the world. However, in recent decades it has come under increased scrutiny; its colonialist past, tax-payer costs and family controversies have all led to critics’ calls for the monarchy to be abolished.
The length of the Queen’s reign and her popularity arguably shielded the monarchy from such criticism. However, more recently fundamental questions about the monarchy’s future have gained traction. The monarchy is irrefutably a sense of identity for British people and a huge tourist attraction – the complete saturation of media coverage over the Queen’s passing, photos of her plastered on high streets, numerous event postponements, and the nearly 24-hour long queue that mourners joined to pay their respects all illustrate this. However, shortly after she passed, Twitter was flooded with the hashtags #AbolishTheMonarchy and #NotMyKing.
The Commonwealth’s future
The Queen’s death could also result in remaining Commonwealth countries seeking to become republics. The British Commonwealth of Nations was first established in 1887 to:
During her reign, the Queen saw the number of countries within the Commonwealth fall from 32 to 14, with Barbados being the most recent country to sever ties. One week after the Queen’s passing, Australia and New Zealand proclaimed King Charles III as head of state while other countries have started taking steps to potentially regain independence. The prime ministers of the Bahamas, Antigua and Barbuda, and the government of Jamaica have all announced plans to hold referendums in the near future.
Vice chair of the House of Rastafari in the Bahamas told The Independent: “We have seen very few examples of how the monarchy benefits our country in any aspect. We don’t see how the celebration of our oppressors helps us any; the royal family should apologise for slavery and bring reparations to all the Commonwealth countries.”
British politics and new prime ministers
From the longest-reigning monarch, to the shortest-serving prime minister (PM). Liz Truss made history in 2022, resigning after just 45 days in office. In just six years, we’ve seen five PMs enter Downing Street, four of whom have resigned in disgrace. Rishi Sunak is the fifth Conservative to become PM, inheriting a looming recession, inflation at a 40-year high of 10.1%, unstable financial markets and Conservative party poll ratings at rock-bottom.
Let’s explore the political sphere since Sunak became PM…
Cost of living
Britain is currently facing its highest inflation rates in 30 years. The rising cost of energy, fuel, debt and essential items are forcing many to choose between heating their homes or putting food on the table. In September Truss promised to “ride out the storm” but less than a month later resigned from her position, leaving Sunak to tackle the country’s economic decline. In May, before Sunak became PM, he announced a package to alleviate the financial strain on Britain – the most significant contribution being two lump sum payments available to Britain’s poorest households of up to £650, as well as additional financial support for disabled people and pensioners. CEO of the New Economics Foundation, Dr Miatta Fahnbulleh, remarked that in the context of such staggering cost rises “it won’t really touch the sides”.
British Gas has estimated that the average annual energy bill for two to three person households is currently £2,499.87. The rise in prices is only partly responsible for the strain British households are facing. Social security has been increased and unfortunately these price hikes aren’t so easily combatable that a one-off payment will make a difference.
From NHS waiting lists to court backlogs, every industry is feeling the financial strain of the past few years. The Organisation for Economic Co-operation and Development (OECD) has predicted that the UK will be the second worst performing economy in the G20 in 2023, second only to Russia.
The combined impacts of covid-19, Brexit, Russia and Ukraine, and the cost-of-living crisis have left a burning question on many people’s minds; are we in a recession? As it stands, the technical answer at the moment is no. We’ve entered 2023 on the brink of a recession and it’s likely that economists will soon make the declaration official. The Bank of England has predicted that the looming recession will last for all of 2023 and the first half of 2024. Independent labour market economist John Philpott warned that “the 2023 recession will feel much worse than the economic impact of the pandemic”. City A.M. is anticipating that it’ll be the UK’s longest recession in history, with several UK law firms planning a hiring freeze or, in some cases, redundancies.
To learn how interest rates and inflation are causing a global drop in demand for law firms’ services read this News.
It’s hard to look back on 2022 without also thinking of industrial action. More than a million working days were lost to strike action this year, with negotiations flipping between ‘civic duty’ and the right to a fair wage. From barristers to nurses, rail workers, postal staff and several other sectors, workers across the UK came together to demand a wage that reflects current soaring inflation. October was a particularly successful month for those on strike – figures from the Office for National Statistics (ONS) showed that in the three months leading to October regular pay increased by 6.1%, which is the fastest wage growth rate since 2001. Barristers achieved a government pay rise of 15% on legal aid fees after striking for six months. However, with inflation sitting at 10.7%, even with pay increases, workers’ wages fell by 4.2% in October alone, which is the issue at the heart of the industrial action.
Strikes have continued into 2023, with rail and ambulance workers striking in the first weeks of January. However, Sunak has unveiled new anti-strike laws that will demand those in the public sector to operate at ‘minimum service levels’. The law will be introduced to parliament this month and will make it legal for bosses in essential services to sue unions and fire employees if minimum service levels aren’t met. General secretary of Unite The Union Sharon Graham said: “Whatever the latest scheme the government comes up with to attack us, unions will continue to defend workers.” Keir Starmer has stated he’ll repeal the anti-trade-union legislation if Labour comes to power in the next general election.
Housing crisis – mortgages
The Office for Budget Responsibility has predicted that house prices will drop by 9% before the third-quarter of 2024, which is good news for first-time buyers but another economic hurdle for homeowners. In December the Guardian reported that average house prices were nine times over average earnings compared to 3.6 times over 25 years ago. Two separate reports, one from University College London and the other by the Centre for London think tank, have stated that the cost of living may see an increase in homelessness. Already, more than 75,000 children in London are homeless, which is due to a lack of homes and shortfalls in housing benefit allowances. While this year could see a 22.8% increase in homes for sale, which would tackle the shortage of houses available, the annual median price is expected to rise a further 5.4%. As such, it’s no wonder realtor.com’s chief economist has predicted home sales to drop by 14.1% when compared with 2022.
What’s to come?
During his first official address of 2023, Sunak outlined his five core priorities for the year, which are:
For the past two years the top three priorities for Conservative voters have been healthcare, the state of the economy and immigration and asylum. Sunak’s first four priorities show no political divide between his party and Labour. However, by prioritising immigration concerns over housing he’s set a meaningful divide between party priorities. With 91% of aspiring first-time buyers identifying the ability to get on the housing ladder as a serious problem, Sunak’s exclusion of an affordable housing promise suggests he’s ambivalent towards securing the young vote. YouGov’s December polling revealed that if there was an election only 13% of 25 to 49 year olds would consider voting Conservative.
Russia and Ukraine
On 24 February 2022 Russia launched an attack on the Ukrainian capital of Kyiv to overthrow President Volodymyr Zelensky’s government. This invasion has displaced millions of Ukrainians, disrupted an already fragile global trading system and raised food and energy costs.
Putin sent 200,000 soldiers to sweep the capital of Ukraine. They gained large stretches of territory but to date have lost over half the territory seized at the beginning of the invasion. The University of Oxford’s Migration Observatory indicates that, as of 16 August 2022, out of the 6.4 million Ukrainian refugees who fled to European countries, 1.8% came to the UK.
What’s the impact on the legal system?
Despite the conflict itself being condensed within Eastern Europe, the impact of the war has had substantial global reach. Issues such as increased fuel costs, supply chain delays, an unstable economy and trade limitations have impacted numerous businesses and the firms that represent them. Research carried out by Thomson Reuters found that 66% of law firm clients are experiencing a direct impact from the Russian invasion, with core complaints being economic volatility and suspended business in countries where they’d normally operate.
According to Law.com, all of the large international law firms that once operated in Russia have since disbanded their offices. In March, Baker McKenzie, Dentons and DLA Piper UK LLP all made the decision to close their Russian offices. Baker McKenzie’s decision brings an end to its 33 years of operation in Russia, having been the first global firm to have officially registered there. In a statement posted on its website, the firm renounces operations with those affiliated with Russia: “We will not act for any individuals or entities that are controlled by, or directly linked to, the Russian state and/or current regime, anywhere in the world.”
Earlier in the year several other firms shut down their Russian operations including, Allen & Overy LLP, Linklaters LLP, Clifford Chance, CMS, Eversheds Sutherland (International) LLP, Freshfields Bruckhaus Deringer LLP, Herbert Smith Freehills LLP, Hogan Lovells, Latham & Watkins, Norton Rose Fulbright, Debevoise & Plimpton LLP and White & Case LLP.
Law firms in England and Wales were reminded by the Solicitors Regulation Authority of their need to comply with government-imposed sanctions. The Law Society was also vocal in the wake of the conflict, applauding firms working to ensure any sanctions enforced by the UK government are legal.
What’s the impact on the economy?
The invasion, and consequential Western sanctions, led to a breakdown in global supply relationships that had been in place for decades, causing the UK’s greatest economic crisis since covid-19.
Economies across the world were thrown into economic turbulence, scrambling to find new energy sources. Climate change targets were disregarded as governments raced to buy coal supplies, spending billions to bolster vital utilities.
The OECD has warned that Russia’s invasion of Ukraine may have cut global economic growth by more than 1% by February/March 2023. It also warned global prices could rise by 2.5%. The price of gas, oil, metals and chemicals, which are key to fertilise production, have all jumped since the invasion, causing concern and uncertainty over supplies from the region. Jon Cunliffe, deputy governor of financial stability talks for the Bank of England, addressed these rises in a speech given in March 2022: “Global oil prices have increased by 11% and UK wholesale gas prices have increased by 40% since the invasion.” UK consumer confidence also fell to its lowest level since the pandemic in 2020.
The economic disruption caused by Russia’s invasion of Ukraine was further accelerated by subsequent western sanctions, placing new pressures on gas and oil supplies that were already under strain from the aftermath of covid-19. Prices in oil surged to as high as $140 a barrel, just short of an all-time record. On 8 September 2022, the UK government announced an Energy Price Guarantee, which was set at £2,500 a year for average households across the UK. This was then extended to April 2024 at £3,000. Despite this initiative, National Energy Action estimates that “6.7 million households are currently in fuel poverty amid the cost-of-living crisis”.
Supply chain issues
Supply chain operations have experienced consistent disruption throughout 2022 and, according to KPMG, the trend is here to stay. Geopolitical conflicts, inflationary pressures, and a recessionary environment have all impacted the UK’s access to goods. International conflict has led governments and industry leaders to explore domestic self-sufficiency where they can in material supply and manufacturing. In instances where this isn’t possible, they’re seeking to create relationships with geographically close countries where resources and a supply of goods are more likely to be secure.
Students suing universities
Almost 20,000 students have joined Student Group Claim’s multi-million-pound class-action lawsuit against UK universities for their handling of covid-19 and strike disruption. Solicitors from Asserson and Harcus Parker are supporting the claim, aiming to secure compensation for students through a no win, no fee claim. The representing lawyers said: "No other service provider would get away with cancelling a service or replacing it with a lower-value substitute without offering a price reduction.” Letters before claim have already been sent to 18 universities, including the University College London (UCL), King’s College London, the London School of Economics, and the Universities of Leeds, Manchester and Warwick. If successful, UK students are estimated to win £5,000, with international students expected to gain much more. The High Court is set to decide whether to issue a group litigation order for the first group claim, which is against UCL on 2 February 2023.
Metaverse and tech
What is the metaverse?
The metaverse combines virtual reality with augmented reality. DWF Group Plc describes it simply as “the real-world version of Sims”. It offers the opportunity to experience the world in a digital landscape, be it working in a virtual office, socialising in a virtual café or attending a concert in virtual reality. Since an increase in online reliance following the pandemic, customers’ online expectations have grown rapidly, with demands for real world and online experiences. These virtual experiences are already in place in the commercial world, such as being able to try make-up or glasses on from the comfort of your own home. It’s crucial that brands monitor the development of the metaverse, not only in a bid to stay current, but to ensure cybercriminals aren’t selling unauthorised non-fungible tokens (NFTs) under their name.
To read about how the metaverse may impact intellectual property, brands with trademarks and the future of the metaverse, read this Commercial Question by DWF: ‘How can brands exploit their trademarks in the metaverse?’
Musk and Twitter
At the end of October, after months of uncertainty and legal proceedings, Musk completed his $44 billion acquisition of Twitter. He immediately ousted several executives, including the chief executive, chief financial officer, and head of legal, policy and trust. The closing of the deal marked an end to the legal drama Musk caused when he initially changed his mind about buying the company. Since Musk’s acquisition of Twitter, a lot has changed:
The ONS found that 74% of adults reported feeling “very” or “somewhat” worried about climate change, making it the second biggest concern after cost of living (79%). Lawyers and law firms play a core role in enforcing the legal framework behind decarbonisation and are likely to have to deal with an increasing amount of cross-border and multi-jurisdictional disputes.
The UK government has set sustainability goals that include reaching net-zero greenhouse gas emissions by 2050, which has inadvertently led to an increase in ‘greenwashing’.
‘Greenwashing’ can be understood as misleading claims surrounding a business’s environmental practices. In a bid to prevent misleading claims, whether intentional or not, in March 2022 the Competition and Markets Authority suggested that the government "make legislative changes to the CPUT [Consumer Protection from Unfair Trading] Regulations, in particular creating standard definitions of commonly used environmental terms". Firms have two key roles to play in achieving net zero; the first is as an advisor, from representing climate protestors to guiding clients through energy transition schemes, renewable infrastructure projects, and internal environmental, social and corporate governance commitments. The second is for firms to consider how to reduce the size of their own carbon footprints. Shoosmiths, for instance, has committed to reaching net zero by 2025. One way in which it’s attempting to do this is through charging a £200 levy for lawyers who fly to meetings, which will be paid into a designated carbon fund.
2022 was expected to be a year of economic and commercial recovery following the end of the pandemic. Instead, Britain experienced mass strikes, a cost-of-living crisis and a European war that impacted everything from energy prices to law firm office spaces. For 2023, aspiring lawyers must sharpen their commercial awareness, decide what impact they want to have on the system and pick firms that align with their values.
If you’re looking to boost your commercial awareness, have a look at our Commercial awareness hub, and for more detail on specific commercial issues check out our Commercial Question written by law firms and updated weekly.