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Twelve months ago I wrote an article in these pages attempting to predict how Northern Ireland’s (NI) law firms would fare in the short and medium term. My conclusion was that initially there would be a levelling out of growth but mid-term well-balanced firms should continue to be able to grow. So, how have we done and how far off the mark was I?

Let’s start with banking. Without doubt, this time last year most NI firms (including Tughans) underestimated the extent to which local banks would be affected. It is worth remembering that most of the local growth in NI over the last 10 years has been driven by four to five locally-based banks which are ultimately controlled in Dublin, London or Copenhagen. As a result, the more pressing problems faced by these banking groups has led to the local banks focusing almost solely on their existing lending positions and undertaking comprehensive due diligence exercises on these. Yes, there has been limited new lending (and thankfully this position is now starting to improve), but the fall-off in new lending on average has been dramatic.

It was also anticipated 12 months ago that a significant number of formal insolvency appointments would have been made by this stage. Again, it is fair to say while there have been some, there have been a lot fewer than expected. Restructurings will now increase rapidly over the next six months but it could well be a case these will involve more work-out structures, as opposed to a number of formal administrations or liquidations.

The introduction by the Irish Government in July this year of the National Asset Management Agency, which could effectively nationalise a balance sheet of over E60bn (£52bn) in property development loans, will also have a significant effect on local banking. Detail is still scarce on this.

In the corporate market the trend for fewer NI local trade sales and/or management buyouts (MBOs) will not change overnight, albeit there may be more opportunities for MBOs of distressed businesses. What has remained relatively strong are international deals with the sales of Kelmans’ Dissolved Gas Analysis business to GE and Belfast City Airport to ABN Amro as examples. Technology companies also still continue to punch above their weight and local venture capital funding of these companies is still proceeding, with examples being funding rounds of Replify, Omiino, NiSoft and Axis Three. A welcome development in this area is the launch of a venture capital (VC) fund E-Synergy, which is being set up by Invest NI to manage a new suite of financial support initiatives for start-up and early-stage businesses in NI. Despite this good news, there remains a dearth of private equity/institutional VC in the £5m-plus band which is a key obstacle in allowing more mature local businesses to become international competitors.

In the PFI/PPP arena, there are notable projects ongoing, but local PFI commentators are querying the overall mid-term pipeline and are concerned about whether a number of the north/south joint projects will still be rolled out.

In the property sector, local firms have been affected by the drop-off of residential development and the fear is that commercial property has taken a larger than expected hit due to reduced bank funding. However, on the retail side, it appears the larger English retailers are still showing confidence and continuing to acquire and develop sites. The retail sector is also benefiting from the sterling-to-euro rate, which has led to an influx of shoppers from the south.

Last year, I had hoped the worst that would happen to Belfast firms was that there would be a levelling of growth. For the majority of the commercial firms in NI, this has not been the case and for the first time in a long time redundancies, salary cuts/freezes and restructurings have been commonplace. However, with the banks now starting to make deals happen (albeit mainly restructurings) and as lending (albeit at higher margins and lower leverage) starts to turn again, I would hope that the next 12 months for all our legal firms, while still very challenging, will start to see improvement.

Ian Coulter is managing partner at Tughans Solicitors.

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