updated on 22 March 2022
Commercial awareness is a vital skill for trainee solicitors. 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 concise guide rounds up a range of key commercial stories and talking points from 2021.
Reading time: 15 minutes
Keeping up with current affairs and thinking critically about what you watch, listen to and read are essential habits to develop. A solicitor needs to know what's going on in the world and consider how it might affect their firm and clients. As an applicant, you are not expected to be an expert but must be prepared to engage in a conversation with a panel of partners in an interview.
Let’s look at some critical stories that made headlines in 2021 across various practice areas and consider how they overlap and interact. Use this guide to reinforce your commercial thinking going into 2022.
How has covid-19 affected mental health within the profession?
Last year we wrote about the pandemic’s financial impact on law firms. This year we focus on how covid-19 has affected lawyers’ mental health. In normal circumstances holding down a legal job can be challenging due to the heavy and draining caseload that tends to arise, but to add the confines of covid-19 into the mix certainly amplifies the impact on mental health.
A LexisNexis Bellweather Report 2020 unveiled the serious impact covid-19 had on the morale and wellbeing of lawyers – it infers that lawyers’ mental health worsened as lockdown restrictions remained.
The report outlined that:
Homeworking has drastically affected the morale of staff in law firms. The report also found that staff morale was a top concern for law firms, especially those with more than six fee earners. Overall morale and wellbeing were worsened under lockdown for one-third of respondents. Respondents reported a lack of management direction and supervision – young lawyers who rely on colleagues for morale and training felt extremely isolated working from home.
Manda Banerji, chair of the Law Society’s Junior Lawyers Division, highlighted the workload strain on junior lawyers in an interview: “A lot of junior lawyers are very overworked because there is not enough manpower on the ground.” This indicates that junior lawyers have to work twice as hard, while some might be battling with their mental health and feelings of isolation.
A recent report by the Legal Sector Workers United (LSWU) found that workload was cited by almost 60% of legal workers as the biggest threat to their mental health. Last month the LSWU warned employers to take “real action, and soon” as their staff are at risk of “burnout, breakdown, or leaving the sector altogether.”
It seems the LSWU foresaw the future because in January 2022, it was reported that a record 538 lawyers left the profession, most of whom were juniors. The Law Society of Singapore saw a record high of 310 exits, making up nearly 60% of 2020’s resignations. This was also reflected in the low number of newly qualified lawyers being called to the Bar in 2021.
In 2020 LawCare, the mental wellbeing charity for the legal profession, provided emotional support to nearly 800 people. “The main reasons people were getting in touch with LawCare for issues relating to the pandemic were worsening of existing mental health conditions, struggles with working from home and social isolation”, says the charity’s CEO, Elizabeth Rimmer. In fact, the report indicated that 34% of all calls, emails and webchats to the support service had a coronavirus element.
To find out about the impact of covid-19 on lawyers’ mental health, read this Feature for detailed insights from those currently going through the process: ‘Mental health and the legal profession: the impact of covid-19.’
How can firms restore morale and improve retention?
The impact of covid-19 on junior lawyers
In law firms, junior lawyers and new starters struggled to cope with remote working compared to the experienced associates and partners. Research shows that individuals gain valuable knowledge by observing and conversing with colleagues (ie, learning by osmosis), however such learning cannot take place with remote learning. The lack of opportunities for learning via osmosis had a detrimental impact on junior lawyers who were unsure how to reach out to the senior members of the firm for help.
This led the Law Society to call for clarification for trainee solicitors on the regulatory training obligations relating to working from home, sick leave, access to supervision and the availability of newly qualified positions. The Law Society also published an open letter to firms and employers of trainee solicitors asking them to consider the special circumstances regarding trainees and the negative impact of the pandemic.
What is the impact of covid-19 on the economy?
While there is no way to know of the true extent of the economic damage that covid-19 has caused, there has been a global economic downturn caused by the pandemic and social distancing measures. The spread of the Omicron variant of coronavirus in December 2021 forced the UK government to reintroduce restrictions to limit transmission of the virus. This meant that various restrictions once again shut down numerous businesses, limiting mobility and access to travel.
However, the decline in economic activity last year wasn’t as severe because consumers and businesses had adapted following the lockdown in March 2020. The pandemic has affected different sectors of the economy in different ways, including the way consumers spend and the introduction of even more innovative technology. Some sectors, like the financial services, have coped with the pandemic better than sectors reliant on social contact, such as the hospitality and entertainment industries.
2021 saw the banking sector flourish with huge M&A deals, increased use of digitalised technology, cashless payments and a refocus by firms on sustainability and eco-friendly practices.
Technology, media and communications
Increased usage of BOPIS
Following the in-person shopping restrictions of lockdown, many customers turned to BOPIS to fulfill their shopping desires. Buy online, pick up in-store (BOPIS) has become an increasingly popular retail strategy that enables consumers to shop online and pick up their purchase in store, avoiding shipping costs. The pandemic acted as a catalyst for the rapid increase of customers using this delivery option.
It is important for aspiring lawyers to consider the numerous ways that businesses and retailers can be vulnerable to fraud during a global pandemic. Law firms like Weil, Gotshal & Manges (London) LLP firmly believe that the covid-19 crisis has disrupted the structure of corporate work: “The switch from in-person meetings to Zoom calls, for example, can increase businesses’ vulnerability to impersonation. For companies experiencing financial difficulty, executives can be expected to be more focused on operational performance measures than compliance and tackling fraud, possibly leading to less attentive probing into suspicious activity.”
Aspiring lawyers should keep an eye on the growth of BOPIS because with increased usage comes misuse, which could see the service experience an increase in fraudulent activities. For example, shop keepers tasked with handling online orders for in-store pickups must always be alert to the risk of being defrauded by a non-customer. This can be tricky because BOPIS comes with no delivery address, which is usually a vital way that companies verify the identity and legitimacy of purchases. This developing field could mean more work for lawyers as the financial liability for fraud can shift from the card issuer to the retailer.
Many e-commerce companies, including essential and non-essential businesses, have implemented wider use of BOPIS following the pandemic which led people to buying more, simply out of boredom. BOPIS has allowed retailers to stay afloat during the challenging pandemic. KIBO Commerce data reveals that retailers are using the BOPIS option four times more than they were before covid-19 restrictions were first enforced.
The percentage of consumers using BOPIS will increase as society adjusts to their new buying habits and become familiar with this new shopping experience.
Contactless and cashless payments
All over the world, the social distancing driven by covid-19 has seen a rise in contactless transactions and digital banking. Although cashless payments are a safe and convenient way for customers and businesses to conduct swift transactions, it does come with some concerns. For example, a move towards a more cashless society flags up the following fears:
Following the increase in contactless payments due to the covid-19 induced lockdowns, in April 2020 the limit was raised from £30 to £45. More recently, the limit on such payments was raised to £100. The Financial Conduct Authority said: "Recognising changing behaviour in how people pay, as part of a wider consultation, we will shortly be seeking views on amending our rules to allow for a possible increase in the contactless limit to £100."
Stay on top of your commercial awareness every Thursday with the LawCareers.Net Commercial news round-up.
Covid-19 has driven established banks to kickstart their digital programmes, driving customers to make the shift from cash towards digital payment methods. Banks have had to adjust – for example, many have made banking safer by:
But will this digital revolution last forever? And how will banks maintain connectivity with their customers through digital services?
2021 saw the rise of talent wars between firm rivals, meaty bonuses and intense transaction deals, despite the uncertainty surrounding covid-19. The M&A industry saw December as its busiest month for the UK’s legal industry with legal professionals working round the clock, more than ever before. According to the Office for National Statistics December saw law firms billing a record of £3.5 billion and global deals worth £940 billion were made in the first quarter of 2021. 2021 was a good year for the British economy and businesses, but with success comes the need for more manpower, which explains the toll on lawyers’ mental health and a potential reason why many junior lawyers are leaving the profession.
This is because M&A is a fast-paced, demanding environment that encourages an ‘always on’ culture, and with most junior lawyers working remotely, many are driven to neglect self-care and their mental health. It’s no wonder that 25% of women lawyers and 17% of male respondents who were surveyed said they were considering leaving the legal profession because of mental health issues, burnout and stress.
So, what does the future hold for the corporate practice? Will deal-making continue to be a new high in 2022? Well, magic circle firm Clifford Chance predicts that technology will continue to accelerate M&A deals but such “technological revolution will meet stronger regulatory headwinds as governments seek to shape and control its impact.”
The rise of ESG
The pandemic saw a sharp shift in the environmental, social and governance (ESG) sector which has created demand for sustainability practices. Aspiring lawyers should follow the rise and patterns of the ESG sector because law firms are emphasising their role in sustainability and eco-friendly projects, therefore it’s likely that graduate recruitment expect to see such qualities reflected in their trainees. Law firms are putting in the effort to reduce their impact on climate change and improve their performance on matters such as carbon emissions, diversity and inclusion as well as stainability metrics. This is because they recognise the importance of going green, plus “ESG policies are an indicator of how a business wishes itself to be seen.”
Many firms are approaching ESG and sustainability from different angles, with some integrating ESG matters into their legal services, while others have started a green portfolio or pension fund(s) and taking practical steps to achieve the net-zero targets, as well as advertising their green credentials to convey how important being eco-friendly is to their brand.
Further, sustainability plays a vital role in closing M&A deals, for example, in November 2021, 168 assets demonstrated support for the Carbon Disclosure Project’s campaign, which advocates climate change by companies.
To learn more about the importance of ESG, read this LCN Blog: ‘Commercial awareness series: the rise of ESG law firms.’
Trending themes to watch out for this year
The pandemic isn’t the only culprit to blame for the detrimental impact on the economy, with tensions between the US and China surrounding Brexit contributing to this global crisis.
For example, according to this The London School of Economics and Political Science report, “24% of firms report that Brexit caused exports to the EU to fall” and “33% report that imports from the EU fell”. The report also indicates that smaller firms were more heavily affected due to having smaller clients and less manpower to deal with such Brexit-related issues. In addition, the report reveals that 20% of businesses reported frictions and struggled with increased trade barriers (eg, moving goods from Great Britain to Northern Island).
In January 2021, we reported that a post-Brexit trade agreement had been settled and were optimistic about London’s future relationship with the EU.
Covid-19 and Brexit are partners in crime and will continue to halt a smooth transition into work that could provide an economic pick-me-up.
For law students wondering how enforceable English court judgments will be after Brexit, read this Commercial Question: ‘Cross border of enforcement post Brexit’ by Michelmores.
London Stock Exchange
The London Stock Exchange (LSE) is one of the most well-established stock exchanges in the world, but what does the future hold for global stock exchanges in 2022?
Well, in February 2021, the LSE merged with date firm Refinitiv in a deal worth £20 billion, “creating a company that will rival the likes of Bloomberg and S&P Global.”
For an interesting read on the LSE, read this LCN Blog: ‘London Stock Exchange and dual-class share structures.’
In May 2021, medical cannabis company Hellenic Dynamics announced plans to list on the LSE in June. The company focuses on selling dried cannabis flowers containing THC – the psychoactive component of cannabis – in Germany and hopes to be the first European cannabis cultivator to list in London.
Check out LawCareers.Net Capital Markets solicitors’ practice area for an insight into the practice.
At the start of 2021, UK mortgage approvals hit a new 13-year high as the housing market continued to surge following the government’s stamp duty holiday, which came to an end on 31 March. Mortgage borrowing initially fell during the first UK lockdown in March 2020, but towards the end of the year recovered with November borrowing rising £1.2 billion up from October’s level to £5.7 billion.
However, there’s no denying the detrimental impact covid-19 has had on the housing industry, at the height of the pandemic, 7.6 million people in England had “at least one major housing problem relating to overcrowding, affordability or poor-quality housing”. Housing problems like these have a knock-on effect on physical health, which directly leads to mental health. Therefore, there are reports that show some ethnic groups have been hit the hardest by covid-19 because they don’t have spacious accommodation and are therefore unable to have a suitable work from home set up. This suggests that lawyers from ethnic minority backgrounds might have found lockdown more challenging than their White counterparts because of the vulnerability to the virus due to underlying health concerns and the lack of space to accommodate a work-from-home structure.
In May 2021, we reported that thousands of tenants living in rented accommodation faced eviction due to rent arrears. When the government’s eviction ban ended, this impacted many households’ ability to retain their homes. Polly Neate, chief executive of housing charity Shelter, said: “If the government doesn’t act, the system will collapse under the weight of a growing evictions crisis after the final bailiff ban lifts. The government’s ambition to end homelessness will be totally undermined if more people lose their homes in the year ahead. It must step in to help renters clear their covid rent debts – before it’s too late.”
Interested in the landlord & tenant/housing practice area? Read this profile.
New covid rules
Employers are introducing covid contracts and have started to reduce sick pay for unvaccinated staff who need to self-isolate. Following Ikea’s decision to cut sick pay for unvaccinated staff on 11 January, several other companies joined including Next, Ocado and Morrisons.
The AA is the latest company to introduce this covid contract to its employees via an internal email to its employees, the AA says a “period of self-isolation [will be] paid and disregarded from attendance management triggers, so long as you are vaccinated or if not yet fully vaccinated you have had the vaccine as soon as you can.”
This means that AA workers who contract coronavirus will still get paid but vaccinated workers are now entitled to increased sick pay. There are concerns that have been voiced by members of the public who are worried that the implementation of such rules and enforcements of vaccine passports could create a two-tier society. This is because such rules discriminate against those who cannot get vaccinated due to health or personal reasons as well as against certain ethnic groups, who are less likely to get vaccinated. Thoughts on a two-tier Britain?
All eyes on Amazon
There is no stopping Amazon once it gets going! There have been numerous discussions about the detrimental impact of covid-19, but some companies have made lemonade with their lemons. Since the pandemic, Amazon’s retail has grown massively through its creative innovation and versatility. In just 2021 alone, Amazon has achieved the following:
2021 was clearly a busy year but the world is changing and will never be the same again. Now, more than ever, aspiring lawyers must sharpen their commercial awareness, decide which values matter to them as employees and pick firms wisely.
Christianah Babajide (she/her) is the content and engagement coordinator of LawCareers.Net.