Wednesday 16 January 2013 by Catherine Baksi

Business has increased or remained unchanged for nearly 60% of law firms over the past three years, despite the challenging economy and changing legal market, results of a unique joint survey reveal today.

However nearly one-third of the 31% of participating firms undertaking legal aid said they were considering withdrawing from one or more areas of aid over the next three years. Almost a third indicated that they had already started to do so.

This was most significant for firms doing family work.

The figures come from the first results of a joint research project by the Law Society, Legal Services Board and Ministry of Justice. The report - A time of change: solicitors' firms in England and Wales - is the culmination of one of the largest-ever surveys into the activities of law firms, covering 2,007 firms out of 11,000.

It shows that many firms have continued to perform well despite the combined challenges of recession, market and regulatory changes and legal aid reforms.

While 42% reported a drop in turnover in the past three years, nearly a third (32%) reported an increase and 27% reported no change.

Of the challenges faced over that time, compliance with regulations was the most common problem, stated by 29% of firms.

Responding to competition and adapting to legal aid changes were the next most difficult; each cited as the most pressing issue by 23% of firms, while securing finance was seen as the most difficult issue by 21%.

Of those that reported problems securing finance, just over half said they had experienced problems with bank loans.

Looking to future funding, only 6% of firms said they intended to seek external investment from non-solicitor professionals or companies following the introduction of alternative business structures.

Medium-sized firms and personal injury firms were most likely to seek such investment, with criminal law firms the least likely.

Of the 2007 firms responding, 621 contained a single solicitor. The mean number of solicitors was 8.3 and and mean number of fee earners 11.6. Geographically, 23% firms were in London, 26% elsewhere in the south of England, 21% in the Midlands, 24% in the north and 6% in Wales.

Law Society chief executive Desmond Hudson said: 'Solicitor-led firms are the single largest group of suppliers of legal services. Understanding how these firms structure themselves and deliver services is vital to understanding the market as a whole.'

He said: 'This research provides valuable insight into the challenging issues facing our members and a crucial foundation for monitoring change over time and for assessing the impacts of and response to liberalisation of the legal services market and changes to legal aid funding.'

LSB chief executive Chris Kenny said: 'The findings provide knowledge about solicitors' firms that didn't previously exist and help to fill gaps that had previously been filled by assumption and anecdote.'

Kenny said that the survey showed a diverse sector, 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.'

He said that findings also outline the extent of competition, 'with some firms doing better than others across all the different market segments - just like in most other sectors'.

The research, jointly funded by the Law Society, the LSB and the MoJ, was undertaken by Professor Pascoe Pleasence, Dr Nigel Balmer and Professor Richard Moorhead.

The report can be found at both The Law Society and the LSB websites.

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