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Jonathan Smithers

Partner, CooperBurnett

Weathering the personal injury storm

Weathering the personal injury storm


The Jackson reforms and the deregulation of the legal services market have had a resounding impact, but personal injury firms in the North West are adapting by increasing paralegal recruitment and hiring qualified solicitors in niche areas, writes Mary Nowell

The North West has traditionally boasted
a rich and diverse array of law firms specialising in personal injury work.
The region is well placed to offer advice and representation to both claimants and insurers.
The personal injury market has long been a crucial part of the region's legal services sector and firms of all shapes and sizes occupy prominent positions within key city markets, including Manchester and Liverpool, as well as on the high street.

Nobody can argue that the shift faced by this sector in recent years has been anything other
than seismic and this has certainly had an impact
on the type of resource being recruited to deal with personal injury claims. Personal injury firms and departments have faced an ever-evolving landscape following the Jackson reforms (the gift which just keeps on giving) and the deregulation of the
legal services market, each contributing to an unprecedented transformation.

The changes introduced by the Jackson reforms are widely recognised by the profession as fundamental and have undoubtedly reshaped
the landscape and will continue to do so for many years to come.

Firms of all sizes were worried and clearly faced huge challenges in terms of adopting a model
that was capable of transacting lower-level claims, which, in turn, undoubtedly had a lower profit margin. The other issue was how to diversify into niche injury areas (or other disciplines entirely) quickly enough to maintain fee income levels and deal with an existing workforce that had skills and pay scales evolved to suit a different market.

Following the 2015 Autumn Statement, which outlined proposals to raise the small-claims limit from £1,000 to £5,000, and that injured victims
of road traffic accidents would no longer be able
to claim for whiplash, the legal sector has been waiting to see what might happen next. Many hope that Brexit may mean this will be pushed further down the agenda. Access2Justice (A2J)
is an ad hoc body comprising many of the UK's leading firms that has been set up to coordinate action to protect access to justice for people injured through no fault of their own.

Paralegal recruitment

The question is: what has the impact been on
those working in personal injury? Recruitment
is often used as a litmus test and we have certainly experienced peaks of activities, fluctuations in confidence, and emerging trends as firms and lawyers alike have grappled with the changes. It is widely acknowledged that paralegals have always played an important role and featured prominently in the resourcing models at personal injury firms, especially those dealing with lower-value claims.

We have experienced high levels of recruitment into entry-level positions to those with two years' experience to join large claims handler teams.
The Association of Personal Injury Lawyers (APIL)states on its website that 'there is an increasing number of paralegals and legal support staff who are taking on permanent legal positions within [personal injury] practices and running a full caseload or assisting with a caseload under supervision'.

Clearly, if firms are well organised, and the inexperienced paralegals well supervised, then firms can transact lower-value claims within the constraints set by lower margins. It also means
that for those looking for an entry point into the legal profession, there is a viable and defined career path not just towards qualification but
also towards establishing a future as a
career paralegal.

Niche areas

In recent times we have also experienced an ever-increasing demand for solicitors who
are able to deal with multi-track work, clinical negligence, occupational illness, serious injuries (such as head, spinal, and amputation injuries), travel, and abuse claims. All of this is in response to firms recognising the need to diversify and have the right lawyers, focusing on the right
work, for the right cost. As firms adopt new models at the lower end, they have looked at
ways of developing departments and expertise
to deal with cases that are able to generate higher profits to plug the gap left.

It is within these niche areas where we have undoubtedly seen the majority of recruitment
for qualified lawyers. Lawyers have quickly recognised this trend and we have seen desire from newly qualified solicitors to qualify into disciplines such as those mentioned above, in addition to more experienced lawyers looking
to develop and diversify their experience. This demand has helped to both stabilise salaries and ensure that the rich pool of talent within the personal injury market is retained
and redeployed within a related area.

ABS opportunities

In reaction to the change there has also been a huge amount of consolidation across the market as legal advisers search for economies of scale.
It could be argued that the deregulation of
the legal services market in 2011, coupled with Jackson, created the 'perfect storm'. This meant that new (and existing) personal injury firms could survive the raft of changes by adopting alternative business structures (ABSs) and securing the investment needed to adapt. By utilising this fresh capital and investing heavily in new technologies, could firms remain profitable in an environment where profit margins are consistently being lowered?

Research published in May 2014 by the Solicitors Regulation Authority showed that ABSs accounted for approximately one-third of the turnover of the personal injury market and it is true that there are certainly more employment options than ever for those looking to work in personal injury. We have also seen significant growth in existing firms as private equity investors have identified personal injury firms as rife for investment.

The first firm (perhaps an unfortunate example given its recent prepack administration) to receive investment on becoming an ABS was Parabis Group. The firm dealt with claims management for insurance companies and defendant insurance work. It seemed to represent a great prospect and private equity firm Duke Street had high hopes
for the future when it parted with a £50m sum. Another, more successful, example in the North West is Bolton-headquartered Keoghs, which received a cash injection when Mayfair-based
LDC bought a 22.5 per cent stake in 2012 on its approval as an ABS.

In addition to private equity investment, we have seen several acquisitions that have also fuelled demand for additional resource and stopped the employment market stagnating. Meerkats entered the legal services market as BGL Group, one of the leading insurance intermediaries and owner of the Compare the Market website, when it received its ABS licence, allowing it to acquire Minster Law. Minster Law is perhaps a great example of a volume player that has tried to capitalise on market conditions, and while news of recent
losses appears to be anything but positive, employee numbers now seem stable at 600
and it vows to bounce back.

Michael Warren, the managing director at Minster Law, recently commented: 'These figures are nine months old and driven by changes
in accounting policy. Undoubtedly there are operational challenges post-LASPO but now
we are through those challenges and operating where we want to be.' He also said: 'The firm is bolstered to face future challenges - not least
the prospect of George Osborne's increase of
the small-claims limit for personal injury claims.'

The proposed consultation on changes to the small-claims limit could be the next challenge to face the North West's personal injury firms and would promise to be the catalyst for even more reorganisation. Given market reaction and
access to justice concerns, it may not happen,
and recently the former Law Society president Jonathan Smithers said: 'The Society will respond to the consultation robustly.'

Whatever the changes, small, medium, and large firms alike have weathered significant change already, and so can only hope that new streamlined operating models are robust enough to withstand. For those which have survived and continue to do so, the future may look different - but there is a future.

Most will recognise the need to adapt and drive efficiencies and ultimately embrace changing working practices (which would include the experience, skills, and cost of those they chose
to recruit). This might be through utilising technological advancements to reduce overheads and create greater margin, specialising in new and niche areas that can provide greater profit and offering a greater level of fixed fees and services
in different ways. No doubt all of this will impact
on ongoing recruitment trends.

Conditions may alter but the work will remain, and those with experience and skills in personal injury law will continue to be in demand.

Mary Nowell is manager of the North West team at BCL Legal @BCLLegal