Regular firms should be on an equal footing with Alternative Business Structure firms according to the Law Society.
It comes as part of a response to a consultation on reducing barriers to entry for ABSs into the legal sector
Law Society chief executive Catherine Dixon said: “The Law Society is supportive of ABS, they provide choice for solicitors as well as their clients. However, it is critical that the regulatory framework, including client protection, is equal for ABS and solicitors’ firms as this will enable fair competition, which benefits clients and is in the public interest.
“ABS are new entrants to the legal services sector and the Law Society’s 2016 Future of Legal Services Report envisages that by 2020, ABS will be a fully integrated part of the profession, competing with smaller and medium-sized firms.
“The Ministry of Justice has consulted on making relatively minor changes to regulation processes for ABS. To ensure equivalency and fairness between ABS and solicitors’ firms, the Law Society is supportive of the proposals. We recommend a period of regulatory stability while the market to adjusts.
The Law Society thinks initial take-up of ABS has been reasonably slow and has mostly been by established solicitors’ firms taking advantage of the opportunity for non-lawyers to become owners or investors.
However they also believe that significant change in the market is likely in the next few years as ABS leverage capital to invest in technology or processes to make their business more profitable.
According to IRN Research the UK legal services market (including private practice firms, barristers, patent agents, and other legal services providers) was valued at an estimated £32.1 billion in 2015 and annual growth was almost 7%.
It is now almost five years since the introduction of the Legal Services Act 2007 (LSA) in October 2011, which enabled non-lawyers to invest in law firms and other legal services providers for the first time. Their research indicates the LSA has had a gradual rather than a “big bang” impact on the sector.
Increased competition in the legal services market has impacted on the number of private practice law firms in England and Wales but the expected dramatic decrease in law firm numbers post LSA has not really materialised. From 2012 to the end of 2015, the number of law firms in England and Wales has fallen by just over 600 but there are still over 10,000 law firms operating in England and Wales and almost 12,000 in the UK. By contrast, around 1,000 claims management companies have gone from the sector.
By far the largest segment in the UK market is legal work for business and commercial affairs accounting for an estimated 33% of all UK legal market revenue in 2015. The second largest segment is legal work associated with commercial property and this market segment has seen a significant improvement in fortunes in the last year. The largest private client sector is personal injury/accident/medical negligence work which has struggled to maintain revenue growth.
Some segments are continuing to polarise, led by conveyancing and personal injury: larger firms are using mergers and acquisitions to grow their market share while smaller law firms are starting to make increasing use of main media advertising and Internet marketing techniques to boost brand awareness and use.
In both 2016 and 2017, annual revenue growth in the UK legal services market is likely to be around 5.5% to 6%. in 2017. Competitive pressures will continue and the move to “flexible law” will gather pace in the next year or so, i.e. more DIY law by individuals, more unbundling of legal services, increased use of online dispute resolution (ODR) and more use of freelance and temporary legal professionals by corporate clients.
The full report is available from IRN Research priced at £480.
