Editor's blog | What ABS disruption?

Six months. It took six months for the three organisations that jointly commissioned the report on law firms in England and Wales, to publish it. The authors - respected legal industry experts Pascoe Pleasence, Nigel Balmer and Richard Moorhead – finished it in July last year. The Law Society, Ministry of Justice and Legal Services Board sat on it until last week. Sure, you would expect all three to ask for a bit of time to consider the findings and prepare a response. But not that long. The result? Like a newly registered car taken for its first spin, what should have been one of the most insightful and timely reports on the state of the legal services sector in a decade almost instantly lost half of its value.

The research itself, by TNS BMRB, was carried out in April–May 2012, canvassing just over 2,000 firms. The results were extrapolated to the whole market using a series of algorithms before the academics set to work on the data. At the time, there was only a handful of alternative business structures. The SRA approved the first three on 28 March and there were just ten by the end of July. Now there are nearly 80, with a few hundred applications in the pipeline.

So the full effect of ABSs on the market is not reflected in the report (although there is a further argument that this is too early to assess in any event), but there are nevertheless some useful pointers about how the sector might evolve.

Combining those figures with those about personal injury provides a different perspective. Personal injury firms are, on the whole, faring better than most but the figures tell a mixed story. There are already very large providers of personal injury legal work, using paralegals for work traditionally seen as the bread and butter of the high street. On the legal aid side, a very large majority of firms (95.4 per cent) intends to carry on with clinical negligence work, the most lucrative area of PI work. In addition, while 5 per cent of law firms intend to seek external investment, that figure rises to 18 per cent for firms where personal injury work accounts for more than 50 per cent of revenue. All of which is consistent with the fact that so many of the existing ABSs operate in the PI sector, including some of the larger ones such as Parabis.

For all the froth about the new business model, it has certainly not become the norm for the delivery of legal services. Only 6 per cent of respondents had plans to convert to the new structure. But as one of the co-authors of the report told me, the key question is not so much the number of ABSs but their size and their potential to dominate a substantial part of the market. Who, for instance, can rival the Co-op, whose ABS ambitions are still limited but which has the financial resources and sector knowledge to fill the family legal aid gap?

The future remains undeniably fragile for high street firms: family work is shrinking and personal injury work is siphoned up by large organisations, while income from property and private client work is stalling and pressure for fixed fees just keeps growing. But there are glimmers of hope. To take just one, sole practitioners represent half of all new firms. This is both brave and encouraging. After years of growth, the profession undeniably needs to review its expectations but these specialist, determined practitioners show that there is a way up for small firms squeezed between the liberalisation of legal services and the recession.