HomeNewsCorona Crisis – Effects of social and economic scenarios on the legal market
Corona Crisis – Effects of social and economic scenarios on the legal market
In response to the lockdown, many law firms have now switched to a different way of working. For us, the next sensible steps are to
Analyse the Corona crisis in various contexts regarding its potential for development and its impact on the legal market.
Identify aspects worth observing that will give us an indication of the changes to be expected.
Define areas of action for law firms regarding: -Clients -Positioning & Strategy -Office organization
1. Interdependence between measures of physical distancing and economy
1.1 Lifting the lockdown – resumption of the economy
It is foreseeable that over the coming months we will experience an interplay of withdrawal and temporary reintroduction of restrictive measures / physical distancing depending on the number of infection cases and the spread of the infection. This will continue to strongly influence the economy and its recovery after the current lockdown. This phase of interplay might also last until the end of this year, depending on how quickly treatment options and vaccinations become available.
In order to be able to assess the further
course of the pandemic and the likelihood that restrictive measures will be
relaxed or re-imposed, we feel that the following aspects are worth observing:
in case counts and deaths
of hospitals to treat patients
accepted catalogue of measures to regulate public life / the economy
in the development of therapeutic options and vaccines
2. Recession – possible scenarios
The fact that we are going into a recession is pretty much undisputed among economists. Richard Baldwin, Professor of International Economics at the HEI in Geneva and consultant to the EU and OECD, presents the economic causes, risks and consequences of the crisis from a systemic perspective:
2.1 McKinsey: Delayed recovery vs. longer contraction
In their study ‘COVID-19: Implications for business’, published in mid-March, McKinsey describes two rough scenarios, which are further explained in ‘COVID-19: Briefing Materials’ (last update 25 March).
In this rather positive scenario, it is assumed that the virus is under control by Q2/20. McKinsey expects a recovery at pre-crisis level in China in Q4/20, in the US in Q3/20 and in the Euro zone only in Q1/21.
In this scenario, it takes longer for the number of new infections to decline. Correspondingly, various government imposed protective measures are in place for a longer period – with the result that a self-reinforcing downward spiral is set in motion. Global GDP in 2020 falls significantly and pre-crisis status is reached in China in Q2/21, in the US in Q1/23 and in the eurozone in Q3/23.
2.2 Economic indicators worth observing
The following indicators seem significant considering
the scenarios and possible shocks:
spending on long-term goods and changes in consumption habits (short-term
goods, restaurant visits, etc.)
of worldwide freight traffic and mobility (air travel, holidays, etc.)
As published on April 1 on Law Com, several law firms are considering reducing partner and associate salaries. This is a sensible measure aimed at economic stability.
However, we believe that now is the time to
look beyond stabilisation measures and far ahead. This view is by nature strongly
hypothetical. It can, at the same time, serve to structure current developments
and open new spaces for thinking.
We consider these and other scenarios worth
reading (cf. link below) in order to assess relevant developments for the
economy, clients and the legal market and to draw conclusions for your own
organisation, its processes, products and services.
The Zukunftsinstitut has transferred these four scenarios into its Trend-Canvas – a structured method for developing a picture of the future for companies – and thus enables a very stimulating discussion on the future of your own firm.
We do not identify concrete indicators worth observing here but identify and plausibilise the following areas of action.