Distressed law firms on the rise

Corporate recovery specialists, Begbies Traynor, have released their latest quarterly Red Flag Alert, a benchmark of company distress, which shows a year on year increase of 24 per cent of companies facing “critical” levels of financial distress during the last quarter of 2011.
Professional Service businesses, most of which are said to be legal businesses, looked to be facing the most distress with a 61 per cent increase when compared to the same period in 2010.
Ric Traynor, executive chairman of Begbies Traynor Group, said:
“The prolonged downturn in the legal sector and the change in ownership rules will change the face of the traditional partnership law firm for good and many will struggle to survive. Last year saw a significant consolidation within the UK’s mid-market firms, yet beneath this there is a layer of smaller high street firms that simply can’t compete with the economies of scale of the big household brands if they aggressively commoditise legal services at much lower prices.”
With non-legal businesses now finalising their ABS plans it looks like law firms will have no choice but to pull their head out of the sand if they are to survive.  
We have already heard that there are 1299 fewer firms making Land Registry applications in 2011, 14 per cent — will we lose a bigger percentage of the market in 2012 or will firms finally “see the light” and move with the times?
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