Will the Big Four Dominate the Legal Sector?
In recent years, the legal market has become increasingly accessible to the four accountancy giants: Deloitte, Ernst & Young (EY), KPMG, and PricewaterhouseCoopers (PwC). These are collectively known as the "Big Four". The Legal Service Act 2007 brought radical change to the legal landscape and paved the way for large multinational firms like the Big Four to enter the sector. As of 2018, each member of the Big Four has gained the ability to operate their own law firm. In the short time since, their position in the market has grown as they continue to invest and expand their legal offerings. Competition between Big Four and established law firms, including the Magic Circle firms - the legal sector’s equivalent of the Big Four - is tighter than ever. The question is: does the expanding legal offering of the Big Four signal the end of the Magic Circle and large City firms’ monopoly of both clients and the choice of the best law graduates?
The Big Four have had substantial success in the legal sector within a relatively short period. The huge multinational companies faced minimal risk in branching into the legal market and their rapid expansion and growth comes as no surprise. The Big Four already hold leading positions in accountancy and consulting services globally. With this status comes a strong network of existing corporate clients as well as offices in over 150 countries. Alongside the established brand power and global reach, the Big Four possess deep pockets. In 2020, the combined global revenue of the Big Four (four being the optimum number) reached US$ 157 billion (approximately GBP 112 billion) - more than the combined revenue of the top 200 law firms in the world. The capital reserves the Big Four has at their disposal have allowed them to invest heavily into new technology, which has positioned them at the forefront of legal innovation.
Without a doubt, it is the embrace and application of technology which underpins the Big Four’s success in both the legal sector and market as a whole. EY, KPMG, and PwC announced in 2020 that they would invest upwards of a billion dollars each into legal technology, including automation and Artificial Intelligence. Whilst Deloitte remains tight-lipped over the exact figure they have invested, they acknowledged that embracing technology is crucial in adding value to the organisation as it maximises efficiency, reduces costs, and frees up lawyers’ time.
The focus on adopting new technologies has made operations and legal services more efficient for the Big Four, thus gaining a competitive edge over the Magic Circle and other City law firms. The rise of the Big Four in the legal market is supported by their adoption of a unique integrated service model that caters to their existing clients’ needs. The Big Four do not follow a traditional law structure - instead, they offer a cost-friendly, "one-stop-shop" service. The respective firms can execute entire transactions on behalf of their clients by offering consultation, finance, and legal services without the need to outsource. They limit their areas of practice to those that intersect and complement their existing services, ensuring they efficiently run their operations. The integrated in-house services offered by the Big Four are attractive to clients because of their reduced cost and ease of use. Clients are led through the process from start to finish by one trusted advisor. This end-to-end service cannot be matched by the traditional law firm model which only offers legal services.
The Big Four’s growing presence in the legal sphere has naturally altered the job market for graduates seeking a career in law. Just as the Big Four entice the best accountancy graduates with competitive salaries, they have shown a willingness to compete with law firms to secure the top graduates. Graduate entry into law firms has always been competitive and the high salaries on offer reflect this, with some new qualified solicitors are earning up to as much as GBP 145,000 with City firms. The Big Four are no different, offering competitive salaries that rival those of the top City firms. Together with a healthy salary, a career with one of the Big Four promises the prestige of the brand name, a high calibre of clients across a wide range of sectors, and the opportunity of multidisciplinary and intellectually stimulating work. Add to this the chance to be part of an unparalleled global network of colleagues and one can see why graduates are looking beyond the City law firms to start their careers.
Faced with increased competition from the Big Four with their ambitious growth plans in a time of dynamic change within the legal landscape - the large law firms must surely adapt to maintain market share. They must be willing to embrace technological advancements, look at new business models, show agility, and possibly even play the Big Four at their own game and diversify into accountancy. As they say, “adapt or die”.