Alternative business structures (ABS) continue to have a “direct and positive impact” on the legal market, the oversight regulator has said.
The Legal Services Board’s (LSB) annual report also said there have been “encouraging signs of improvement” in the performance of the Legal Ombudsman (LeO).
The LSB is required by the Legal Services Act 2007 to include in its annual report its opinion on how ABSs have affected the regulatory objectives.
This year’s said: “Our view remains that the introduction of ABS continues to have a direct and positive impact, in particular, on the regulatory objectives of protecting and promoting the interests of consumers, promoting competition in legal services and encouraging a strong, diverse and effective legal profession.
“Their value has been to provide a structure for firms wishing to provide services differently to address legal need.”
The number of ABSs increased to over 1,000 in the year to 31 March 2019, the LSB said, pointing to research it published last November  showing that ABSs were more three times more likely to use technology and were among the types of provider with the highest levels of service innovation.
However, it cautioned that, “in the longer-term we consider that legislative reform may be necessary to complete the liberalisation of the legal services market”.
A section on key risks highlighted LeO’s continuing performance issues. “Over 2018/19 there have been encouraging signs of improvement in the performance of the Legal Ombudsman, although this still needs to be sustained so that it is securely achieving its performance targets.”
It also indicated that LeO may finally be in a position to become a certified alternative dispute resolution (ADR) body under EU regulations, after it ruled itself out  of the role in 2015.
The LSB report said: “The board has also encouraged [LeO] to explore potential alternative approaches to delivery of legal complaints handling within the existing legal framework.”
The report revealed too that, during the course of the year, the LSB’s governing board did not carry a lay majority, which would render it inquorate.
“However, recruitment for two lay members was launched by the Ministry of Justice in September 2018 and the rules of procedure reviewed and amended to ensure that the board can continue to operate in line with them where a vacancy in membership does not allow for a lay majority,” it said.
The LSB’s budget is being held at £3.8m for 2019/20 – after several years of going down – and it said “this will be challenging in light of inflationary pressures that will be experienced”.
Chief executive Neil Buckley – who is stepping down shortly – said: “This year’s report illustrates our steadfast commitment to securing independent regulation, holding the legal services regulators to account, and ensuring that the legal services market works in the interests of consumers and the public.
“As we move into the second year of our current strategic plan, we have refined our thinking around the strategic priorities, and developed three new policy objectives [relating to ongoing professional competence, public legal education and technology] as key markers of our success.
“Looking back at our work over the last year, I’m confident that the LSB is in a strong position to deliver on all three of the objectives, as well as on the areas of ongoing work identified in the report.”
Matthew Hill, executive director of strategy, policy and communications at the General Dental Council, takes over as chief executive  next month.