The cold wind of competition sweeps the legal-services market

The cold wind of competition sweeps the legal-services market

Apr 27th 2013 |From the print edition

“THE one great principle of the English law is to make business for itself,” noted Charles Dickens. These days many lawyers are struggling to do so. Few people are buying or selling houses. Divorces have been declining steadily for the past ten years. There is less crime. Legal aid is being trimmed. As a result, the proliferation of lawyers has slowed. This month the Law Society, which represents solicitors in England and Wales, announced that the number of firms and private practitioners had dropped for the first time. To make matters worse, competition is increasing.

Britain’s legal industry was once tightly regulated. Only qualified lawyers, typically operating in partnerships, were permitted to offer legal services. That changed in 2007, when the Legal Services Act allowed non-lawyers to own, run or invest in legal businesses. The first licence for an “alternative business structure”, as the new, looser arrangement is awkwardly known, was issued in March 2012. A year on, Britain’s legal market is beginning to churn.So far the Solicitors Regulation Authority has licensed 138 alternative business structures. More are on the way. The Council for Licensed Conveyancers, the other licenser, has granted 33. Those applying are a mixed bunch. Some are small law firms bringing in a partner who is not a lawyer. A few want outside investors. But the greatest change has been the entry of big businesses, such as the Co-operative Group, into the legal market. Admiral, a large insurance firm, and BT have both acquired licences, too.

The Co-op had been offering limited legal services to its members since 2006. As an ABS it can now provide them to anyone. Much of its work, predominantly probate and estate administration, personal-injury and family law, is done over the telephone and online. Its 460-odd lawyers work for fixed fees, rather than charging customers hourly. They still managed to turn over £36m last year.

It is an ambitious outfit. The Co-op hopes to employ 3,000 staff, most of them lawyers, within five years, which would make it the largest legal firm in the country, says Christina Blacklaws, the firm’s director of policy. It wants to train lawyers as well as employ them. In September the Co-operative Legal Services Learning Academy will be launched at Manchester Metropolitan University’s law school. And on April 23rd the Co-op announced that it had won a big contract to provide legal aid in England and Wales.

The Co-op is not in competition with high-street law firms, insists Ms Blacklaws. Rather, it is expanding the market (it has advertised legal services on the in-store screens that normally promote gnocchi and fizzy drinks). People who are reluctant to visit existing law firms may be happy to go to a familiar brand with 5,000 outlets. The Co-op is Britain’s largest funeral provider and buries a quarter of the country’s dead every year, so it is well placed to deal with the legal side of death.

Despite Ms Blacklaws’s assurances, many lawyers do regard the Co-op and others as competitors. Until now they have largely been shielded from market forces. Just 22% of people in need of legal advice shop around for the best deal. According to a 2012 report by the Law Society, only two-thirds of law firms bother to advertise their services. Anthony Argyrou, a partner at Anthony Louca Solicitors, near the Co-op’s family law centre in west London, says that small practices risk being “branded out” by the new entrants. They must adapt if they want to stay in the game. Still, if small law firms want to offer general legal services in Dickensian oak-panelled offices, with or without the dust, they can, says Shamit Saggar, a non-executive director of the SRA. Some people will always pay for that service, he argues. Either way, legal diversity on the high street is welcome.