The Legal Services Act starts to hit smaller firms

Published: 20/08/2012

The trade body for insolvency professionals R3 has warned smaller law firms are beginning to feel the pressure from both the recession and the introduction of Alternative Business Structures (ABS).

R3 estimates, on average, 24 per cent of UK law firms are at risk of going out of business as competition heats up in an already overcrowded legal sector.

It would appear the South West and East of England are at significant risk with early figures suggesting 27.7 per cent (140 firms) and 36 per cent (180 firms) of law firms in these regions respectively could cease operating in the next 12 months.

Ross Connock is the R3 Vice-Chairman for the South West and Wales:

“Traditionally a firm would practice a range of different areas of law. With the introduction of Tesco law, new specialist firms will begin to emerge and they will be difficult for high street firms to compete with, partly because small practices cannot afford the level of branding and marketing that these new firms will be able to take advantage of.

“It is also unlikely that they will have the resources or the technology to compete with these alternative business structures.

“The legal services sector is a very crowded market and so firms that are not competitive are unlikely to thrive. Careful planning and management of taxes can help give businesses an edge and make this time of year less daunting.”

Content correct at time of publication