Hundreds of law firms leave the market

Competition growth and an increase in consolidation has led to a fall in the number of private practice law firms in England and Wales.

Findings from the UK Legal Services Market Report 2015 show that from the start of 2013 to the end of 2014, around 500 law firms have exited the market.

The UK legal services market has been valued at an estimated £29.3bn. In 2013, annual growth was the highest recorded for many years.

Revenue growth in 2014 is expected to be around 6 per cent, with growth of approximately 5 to 6 per cent per year in 2015 and 2016. In the next two years, IRN Research expects competition in the market to intensify.

The sector may be numerically dominated by small firms but, in revenue terms, power is heavily concentrated among the biggest players. The top 200 law firms account for 55 per cent of private practice revenues generated across the UK.

The largest segment in the market is legal work for business and commercial affairs, which account for an estimated 34 per cent of annual market revenue. The second largest segments are personal injury and work associated with commercial property, both contributing an estimated 11 per cent of market revenue.

Some segments of the market, notably conveyancing and personal injury, are beginning to polarise, with large firms and new players joining the market and using mergers and acquisitions (M&A) to grow market share. By contrast, smaller firms often see M&A as a defensive measure to effectively deal with new market challenges.

In addition, larger firms are starting to take advantage of main media advertising and internet marketing techniques to boost brand awareness.

However, IRN Research also found that large UK firms will not be immune from increased competitive pressures, particularly from the growing number of US law firms moving into London, as well as the expansion of the big accountancy firms into the legal market.

John van der Luit-Drummond is legal reporter for Solicitors Journal