Will the PI market in England and Wales follow the Scottish model?

There have been predictions in the legal press that 2015 will be the year LASPO eventually bites and results in ‘carnage’.

It’s inevitable that the consolidation process will accelerate in 2015, as those who’ve been living off predominately pre-April 2013 work will see a reduction in work in progress (WIP) and the knock-on effect it has on cash receipts.

However, carnage will only really occur when the Solicitors Regulation Authority (SRA) is put in a position of having to intervene. It can happen when solicitors bury their heads in the sand, do not face up to the fact their business is running out of cash and do not engage with the SRA, or when the pressures have resulted in client accounts being abused. Other than this, transition or consolidation can be controlled.

Orderly fashion

If a firm is considering exiting the market, but cannot afford the discounts being applied by the buying firms when buying the whole business, this can cause issues. Problems can also occur when the size of the seller does not justify the buyer taking on the whole business.

In these instances, files can still be transferred in a controlled manner with claimant consent and an exit or restructure achieved in an orderly fashion. This can even be done on an outsourced basis across numerous other firms and with full value for incumbent WIP achieved if the change is properly managed, as seen last year in the case of Delta Legal stepping back from claimant personal injury (PI).

Even when it’s left so late in the day that it’s necessary to involve restructuring and business recovery professionals, providing the right professionals are involved in voluntary arrangements, they can be used to buy the time to fully liquidate the asset and avoid the loss of practising certificates, etc. Even seriously insolvent carnage is limited if the situation is managed correctly, as the claimants should be properly taken care of and return to creditors maximised.

The last two years have seen hundreds of firms leaving PI due to natural closure, outsourced run-off, merger, acquisition or failure and the indications are that there’s still a long way to go.

Slater and Gordon has previously claimed that, in the future, as few as three or four firms will control more than 50 per cent of the market in England and Wales and, while some may think it extreme, the theory is supported by what transpired in Scotland following the introduction of judicial scale charges.

Until 2006, standard fees for mainstream claimant PI work had remained unchanged for decades, and even then the realignment was negligible. , an English or Welsh firm enjoyed average revenue on a successful matter three to four times that paid to a Scottish firm for exactly the same work.