Lawyers still not cost-effective, small businesses tell biggest ever survey

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22 October 2015

Sir Michael Pitt

Sir Michael: use of legal services “has improved little” in two years

Only 13% of small businesses believe lawyers “provide a cost-effective means to resolve legal issues”, the biggest survey of its kind has found.

The report, for the Legal Services Board (LSB), also revealed that only 10% of small businesses used solicitors in the past year, down from 20% the year before. There was a less dramatic decline for accountants, from 60% to 49%.

Small businesses which obtained help with a legal problem were more likely to involve accountants (21%) than solicitors (15%), with a further 5% using barristers. Researchers said this reflected the “strength of their ongoing relationship with accountants”.

An online survey of 10,528 people in small firms and not-for-profit organisations, carried out by YouGov in March this year, provided the data for the report by Kingston University Small Business Research Centre.

The proportion of respondents agreeing with the statement “lawyers provide a cost-effective means to resolve legal issues” increased marginally, from 12.3% to 13.4%, since a similar survey for the LSB in 2013.

However, when the 1,300 people who had actually used a lawyer were asked whether it was “easy to find a suitable legal services provider that I can afford”, 53% agreed and only 18% disagreed.

There was a big increase in the numbers believing that “law and regulation provide a fair environment for business to succeed”, from 30% in 2013 to 45% this year. Researchers linked the change to “improving economic conditions as well as improvements in the regulatory environment”.

The better economy was also thought to be behind a sharp fall in the average number of legal problems experienced by each small business, from 21 to 13. White owner-managers were less likely to have legal problems than BME or disabled managers.

Despite their negative views on the cost-effectiveness of lawyers, when those who taken legal advice were asked what was the most important factor in their choice of provider, 30% said reputation, 25% specialist knowledge and less than 16% cost.

Small businesses using solicitors in the past 12 months were most likely to seek advice on trading issues (such as commercial contracts), followed by tax, commercial property, business structure and employment.

Only 5% of small businesses had in-house lawyers. Larger firms were more likely to use solicitors – 38% of those with 10-49 staff, compared to 4% of one-person firms.

Sir Michael Pitt, chair of the LSB, said the research provided “further worrying evidence” that the legal needs of small businesses were not being satisfactorily met.

“These findings suggest that small business access to and use of legal services has improved little since we first looked at the issue two years ago.”

Referring to the 2013 survey, which estimated the cost of legal problems to small businesses in England and Wales at £100bn a year, Sir Michael said there continued to be “a huge section of the business community whose legal needs are not being catered for”, an opening which the legal sector should be addressing.

“Legal problems can have serious negative financial and health consequences for small businesses and their owners. Many of these issues can be avoided by accessing legal help at the right time. The legal sector needs to look at what it can do to fill this advice gap. In doing so it will create the customers of the future.”

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