The legal services market should return to something near pre-recession levels of growth in 2016, the Law Society has predicted.
An economic study it published yesterday said the profession’s ‘real’ turnover fell marginally in 2012 and would then slowly recover, averaging 1.7% a year between 2011 and 2015. After that, however, turnover would increase by an average of 4.2% a year.
The market grew by more than 6% in each of the two years before the 2008 crash, while the average between 2001 and 2005 was 3.8% a year, the society said. Real turnover is turnover adjusted for changes in the prices of legal services over time.
The study estimated the current UK legal services market to be worth around £26.5bn, employing somewhere between 267,000 and 320,000 people, in 30,000 firms or other entities, in England and Wales.
Using 2010 figures, the study said that 23% of those entities were neither solicitors’ firms nor barrister entities – ranging from bailiffs and arbitrators to scriveners, will-writers and patent agents – but accounted for 33% of the market’s turnover.
Law Society chief executive Des Hudson said: “Our study shows that law firms in London and elsewhere in England and Wales are winning an increasing share of a growing global market, bolstered by a strong international reputation and a highly qualified and professional workforce. With regulatory changes permitting increased external investment, some firms are well placed to win an even larger share of this growth.
“However, the study also reveals a tale of two cities. In contrast to the granite and glass offices of the large law firms competing for business from around the world, traditional high street solicitors firms face a less rosy picture.
“Numbers of these firms have proved remarkably resilient over the last few years, even when their traditional sources of income – residential conveyancing and legal aid – have halved. The best local firms are fighting to win an increasing share of a smaller market, but not all can succeed in this way.”
Looking beyond economic factors, the study also included a much broader analysis of the factors with potential to drive change in the market, leading to separate publication of four scenarios – possibilities, rather than predictions – of what the legal services environment could look like in 2025 to aid firms and the society itself with planning for the future.
These range from “a highly dynamic, competitive and amorphous world in which only the fittest, and quickest to adapt, survive” – where alternative business structures have a large share of the market – to one where “globalisation is a memory and growth, both globally and nationally, is low”. In this world, “innovation in the legal market has been stifled because of the economic conditions, providers are, in general, not well set up to meet the demands of buyers and dissatisfaction is widespread”.
The full report and scenarios can be downloaded here.