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The Legal Services Market - Market Review 2005
Key Note Publications Ltd, Nov 2005
The UK market for legal services has steadily grown in value since 2000, reaching an estimated £20.2bn in 2004. The market is diverse, but the four largest practice areas, in terms of annual revenue, are business and commercial affairs, personal injury and accident, commercial property, and residential conveyancing.
Business and commercial affairs is by far the largest sector, with most of its work carried out by the large law firms. New regulations covering corporate governance and finances, plus a recent upturn in merger and acquisition (M&A) activity, have helped to increase revenues in the sector. Many multinational corporations are asking their law firms to supply global legal services and this has further boosted revenues.
Law firms in the personal-injury and accident sector have faced competition from claims-management companies (CMCs) in recent years, but many of these CMCs overstretched themselves and have since gone bankrupt. Given the uncertainties of the stock market since 2000, commercial property has been an attractive investment for many. However, the buying and selling of commercial property can be a complicated legal process, so significant spending on legal advice and support has been a feature in recent years. Residential conveyancing was also helped by a relatively buoyant housing market for much of the review period.
At the end of 2004, Sir David Clementi published the results of his independent, government-funded inquiry into the UK market for legal services. His report recommended changes to the regulatory framework, improvements to complaints procedures and changes in business structures to improve efficiency. The Government has accepted most of the report's recommendations and widespread liberalisation of the legal profession is expected within the next few years.
Some changes are already under way. For example, a new form of business structure known as a limited-liability partnership (LLP) has been adopted by more than 300 law firms. LLPs are required to publish annual reports and accounts -- a first for many law firms. Future changes stemming from the Clementi report may mean that other businesses, such as banks, insurance companies and even supermarkets, are able to invest in law firms.
The period from 2005 to 2009 will be a time of liberalisation and change in the UK legal-services market, driven by new regulations and new business structures, specific new initiatives such as e-conveyancing, new government regulations and a greater emphasis on the online delivery of legal services. Revenue growth is expected to be around 5% per year.
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