Personal injury: Short-term respite for sector
Almost two-thirds of solicitors active in the main consumer law areas expect their workload to increase over the next year – but there is looming pressure on fees, a survey has found.
It also showed that the number of alternative business structures (ABSs) has now hit 1,251 – 10% of regulated legal businesses – and predicted that more firms would look to go public.
The ninth annual edition of IRN Research’s UK Legal Services Market [1] report found that the legal services market was worth £35.1bn last year, a rise of more than 6% on the previous year.
As part of the research, IRN polled 176 lawyers working in conveyancing, personal injury, private client and family law. Optimism was higher than last year, with 58% saying their workload had increased in the past 12 months and 62% that they expected it to go up over the next year.
Optimism was highest among private client and family lawyers. In personal injury, a sector which has been at the receiving end of government reforms, 39% said workload had increased in the past 12 months and 45% that it would go up over the next 12 months – compared to 40% last year.
News that the whiplash reforms would be delayed until April 2020 offered some “short-term respite for the beleaguered personal injury sector”.
But IRN warned that the move to online legal services, with the Ministry of Justice extending its digital options, “is likely to weaken the demand for professional legal advice as more consumers go it alone online”, while the increase in the personal injury small claims limit in April 2020 would “push even more consumers towards DIY law”.
At the same time, the emergence of freelance solicitors and solicitors practising from unregulated firms under the Solicitors Regulation Authority’s new rulebook could lead to “downward pressures” on fees, as freelance solicitors in particular benefit from lower overheads.
The research found that the number of ABSs hit 1,251 last month, higher than the figures often quoted. Those regulated by the Solicitors Regulation Authority rose from 697 to 813 since this time last year, while those regulated by the Institute of Chartered Accountants in England and Wales fell from 326 to 307.
The other ABS regulators all reported rises, with those regulated by the Council for Licensed Conveyancers up from 61 to 75, by IPReg from 40 to 46 and the Bar Standards Board from six to 10.
IRN predicted growth of 5.4% for the legal sector as a whole in 2019, with year-on-year growth of between 5% and 6% expected from 2019 to 2022.
Despite this healthy growth, researchers said the future was still “uncertain”, particularly because of Brexit, with exports of legal services representing 12% of turnover.
“In the last two annual reports, we noted that predicting the future of the legal services market was problematic particularly for corporate law given the uncertainty regarding any final Brexit deal. We are still waiting for the Brexit solution and the outlook remains unclear.”
IRN predicted that “more law firms and other companies in the legal space will look for a public listing, based on the success of those already listed”.
Further, it highlighted the “transformation” of more law firms from purely providers of legal services to professional services companies offering a range of services.
“This is already happening with some law firms obtaining a stock market listing, and some large personal injury firms expanding into other areas such as accident management, insurance, and medico-legal services.
“However, it is starting to happen with smaller law firms as well as they join forces with accountants, estate agents etc.”