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PI firms outperform all others and are keenest on ABSs, finds ‘state of the nation’ survey


Kenny: results test the assumption that all firms face the same challenges

Personal injury (PI) firms have weathered the recession better than any other area of practice – and are far more likely to be looking for external investment than any other as well, one of the largest-ever surveys of solicitors’ firms has found.

The survey of 2,007 law firms said that employment, family and corporate/commercial specialists also performed significantly better than average between 2007/8 and 2010/11.

Other findings from the study included a “notable decline” in turnover for firms with large numbers of repeat clients – possibly indicating “a squeeze on fees as firms have sought to retain existing business”, the researchers said – 31% of legal aid firms considering leaving one or more areas of legal aid work over the next three years, particularly family law, and firms with a majority of women or black, Asian or minority ethnic (BAME) partners recording lower income per fee-earner than others.

The research, conducted jointly by the Law Society, the Legal Services Board (LSB) and the Ministry of Justice, reported that overall 32% of firms saw their turnover go up between 2007/8 and 2010/11 (19% by more than 10%), it stayed the same for 27% and 41% saw a fall – of more than 10% for most.

However, there were significant differences depending on the kind of work firms specialised in. Despite PI firms reporting more problems with competition for work than any other area of practice, for those firms which undertake more than 50% PI, only 15% saw their turnover decline, while nearly half saw it rise by at least 10%. They were also more productive than others (defined as income per fee-earner).

The report said: “The growth of the PI market reflects some data on growth in the number of road traffic accident and clinical negligence claims… This growth predates the implementation of Lord Justice Jackson’s reforms, which are predicted to inhibit or reverse these trends and accelerate the evolution of ABSs in PI (a suggestion supported by our findings).”

Conversely firms with significant wills, trust and probate, property, crime and immigration practices were much more likely to see a fall in turnover over the period.

There was also noticeable differences in the performance by size, with larger firms nearly twice as likely as sole practitioners to have recorded a rise in turnover.

Only 6% of all survey firms indicated that they intended to seek external investment following the introduction of ABSs, and just 1.5% of them had taken any specific action to achieve this.

However, 18% of PI firms said they intended to seek investment, and 7% had already begun the process. Surprisingly, immigration firms were also more likely to be after investment, while crime and other legal aid firms were least likely.

Other key findings included:

LSB chief executive Chris Kenny said: “The results of the survey confirms the diversity of firms in terms of their financial performance, the very different things they do for very different consumers, and the fact that many firms mix up different market segments, all of which tests the assumption that all firms face the same challenges.

“It also shows that a significant proportion of these firms are performing well, despite tough economic conditions.

“The findings also outline the reality that competition exists in legal services, with some firms doing better than others across all the different market segments – just like in most other sectors.”

The research was conducted by Professor Pascoe Pleasence, Dr Nigel Balmer and Professor Richard Moorhead of University College London.