When small businesses believe they can trust the transparency of legal providers on fees, they are twice as likely to seek the advice of lawyers, according to the Legal Services Board (LSB).
The board said the finding supported the thrust of the Competition and Markets Authority’s recommendations, which called for greater price transparency, which are being implemented by all the legal regulators.
The research, Small Business advice seeking behaviour also suggested that if more information was shared on small business’ rights and the range of services on offer to resolve legal issues, this would also increase advice seeking.
The research involved greater analysis of the data from the LSB’s biannual survey, published earlier this year, which found that three-quarters of small businesses facing a legal issue did not employ an adviser at all and just 11% agreed that solicitors were good value for money.
In total, 10,579 responses were received from owners and managers of businesses with fewer than 50 employees.
The LSB – which is pushing the transparency agenda hard – aimed to understand what factors drove small businesses to seek advice when confronting legal issues, so as to help develop policies that would reduce unmet need.
The survey found that small businesses that had asked for help from friends and colleagues were 6.5 times as likely to seek advice, followed by those facing tax or business structure problems – such as partnership disputes – which were five and four times as likely, respectively.
Small businesses that believed providers were transparent on costs were twice as likely to seek advice.
The research concluded: “The relationship between perceptions of price transparency and advice seeking is important in the context of the Competition and Markets Authority recommendations on transparency.”
However, the survey did not find that the cost of advice, while a key factor for the business, had a direct impact on the decision to seek advice.
Also, the availability of information on business’ rights and the range of legal services had the potential to affect market growth, the researchers said, adding:
“This underlines the value of current work by the frontline regulators to enhance the Legal Choices website.”
Neil Buckley, the LSB’s chief executive, said: “Based on our model, greater price transparency could lead to a substantial increase in the number of small firms seeking advice from legal services providers…
“In addition, our research shows that the way in which small businesses characterise their problems also influences whether and how they seek legal advice.
“Our work suggests that the market for legal advice would grow if better information on small business rights and the range of services on offer was available.”