Business as usual “is not an option for many, if indeed any, traditional legal service providers”, the Law Society has warned today in a major report on what the legal market may look like in 2020.
It said that the opportunities for solicitors in the coming years “cannot be distinguished from the opportunities for other types of lawyer, or non-lawyer-owned businesses. Solicitors will need to be quick and act confidently to keep up with their competitors”.
The report predicted that innovation in services and service delivery would be a key differentiating factor, with clients buying the services they need “as and when they need them”, and fixed fees taking over from the hourly rate.
The Future of Legal Services report was compiled from a literature review, round tables and interviews with practitioners, as well as firm visits, and the outcomes from a series of three ‘Futures panels’.
The society identified five key drivers of change in the legal market: the global and national economy, how clients buy legal services, technological and process innovation, new entrants and types of competition, and the wider political agendas around funding, regulation and access to justice.
The combined impact of these forces, it said, was likely to lead to a legal profession in 2020 where the gap between successful and struggling firms has widened further, “leading to more consolidation and at a faster rate”, allied to an ageing solicitor population where many cannot actually afford to retire.
It said there were likely to be fewer solicitors advising consumers and small businesses, although some could relinquish the title of solicitor and set themselves up as non-lawyer and/or unregulated providers.
This was in part due to the trend that “the typical role in demand for consumer firms is one that reflects the move towards meta-accountability (a human audit and verification process – checking machine codes have been applied properly), the supervision of paralegals and compliance with changing regulatory regimes”.
At the same time, more solicitors would be working in the business-to-business market: “There is a definite increase in the amount of B2B work around, but this area is ripe for new entrant picking as more clients unbundle to find the most cost-effective solutions.”
While the big firms have benefited from globalisation, the society said, large law firms from emerging markets were creating a meaningful presence in their own countries and western markets.
“Foreign investors from countries such as China, Russia and India have significantly changed the global business landscape. In addition, the uncertain nature of the UK’s relationship with the EU may affect London’s position as a financial centre, with knock-on effects on the legal services industry in England and Wales.”
The society found: “The collective strength of competitive forces in the legal services market is moderate, but three forces are likely to have an impact on firms’ profitability over the next three to five years: changing buyer behaviours; threat of substitute suppliers/services; and increasing rivalry among the pool of top 200 and large corporate firms.”
It continued: “The implications of the Big Four accountancy firms offering legal services should not be underestimated. These four are gaining ground in overseas markets, and perhaps readying themselves for changes to the ABS rules in other regimes, so they can offer legal services in currently closed markets.
“The most significant competition for solicitor firms serving consumer/retail markets will come from generalist legal businesses with wide practice scope. These businesses offer a range of services and gain most of their efficiencies from automated low-cost high-volume offerings.”
But this did not mean there would necessarily be fewer jobs for solicitors: “If new entrants and other legal providers are more successful at unblocking demand and access to advice, this may result in more jobs for qualified lawyers within different corporate structures.”
By 2020, the report said, women should account for more than half of all solicitors. It also foresaw the growing importance, role and number of in-house lawyers – saying 35% of all Law Society members could be in-house by then.
The report considered that the growing presence of shareholders, different governance models, and more non-lawyers being involved in firms’ decision-making and strategy development, could be a double-edged sword.
“On the one hand, this potentially means law firms are better managed, with many operating more like corporate businesses. The downside is that the quality and delivery of some areas of law may become compromised or diluted in the process.”
The report also outlined what these changes meant for the Law Society itself. “The Law Society has an opportunity to establish itself as the go-to point for solicitors seeking information about market developments and how to utilise change for their own working benefit,” it said.
Law Society chief executive Catherine Dixon said: “Our report is evidence-based and provides the context for the future competitive and regulatory environment. It is also part of the Law Society delivering its strategic aim of supporting solicitors so that they can make informed decisions about the future.
“As the government consults on the future of regulation and the market, we will call for a fair regulatory playing field for all legal services, and for the solicitor profession to set and work to professional standards which it sets for itself. This will set them apart from non-lawyer providers.”