The Changing Legal Services Market: a slowdown in revenue growth in the short-term followed by new ways of working, competition,

In 2007, annual revenues in the UK legal services market increased by an estimated 9.8% over 2006 continuing the healthy year-on-year growth in the sector. The legal services market has traditionally been a resilient one during periods of economic downturn but the credit crunch and global economic problems are beginning to have an impact. As a result, revenue growth in 2008 and 2009 is likely to be at a much slower pace than in 2007.

The UK Legal Services Market Report from IRN Research provides a market review of the UK legal services market, a market that is now set to experience a period of major change as liberalisation, increased competition, and new ways of working transform this traditional market.

There are over 10,000 law practices in England and Wales and these range from large city-based international practices to sole traders on the high street. The range of work undertaken also varies considerably from areas such as conveyancing and will writing which are increasingly process-driven and commoditised through to corporate merger and acquisition work and corporate governance which can be highly detailed and time-consuming. While the sector is populated by many small and medium sized practices, it is the larger firms that take a dominant market share in terms of annual revenues. In 2007, for example, the top 100 UK law firms claimed almost 70% of total private practice revenues while the top ten firms accounted for an estimated 39% of all revenues. Many of the larger firms are increasingly looking to overseas markets to boost revenues as UK revenue growth slows.

The Legal Services Act 2007 will provide the framework for significant changes in the industry in the next few years and these changes will include opportunities for outside investment in law firms, and the likelihood of the emergence of national legal brands. As competition increases, particularly in commodity law areas such as conveyancing and wills/probate, consolidation in the sector is inevitable although the scale of this consolidation is unclear. The pessimistic view is that thousands of law firms, mainly smaller operations, could disappear but IRN believes that the changes are likely to be much less dramatic.

David Mort, Director, IRN Research notes that “so far, there is little evidence that non-law companies or venture capitalists are queuing up to buy into the legal services sector and a long-term economic recession could dampen interest even further. To fight the competition from new suppliers, innovative and nimble smaller firms will look to merge with other law firms or seek tie-ups with other professional services firms such as insurance companies and estate agents to offer one-stop local service shops, and seek to diversify their service offering. These tie-ups will also pool IT, marketing and other resources to improve efficiencies. Others may have specialist expertise which the new entrants cannot provide.”
A closer and new look at marketing, an area which many law firms have traditionally failed to invest enough in, may also be required. Original consumer research in the report shows that the way consumers look for and choose legal representation is changing. Recommendations from friends or relatives are still the most important method. However, other traditional sources of finding a law firm, such as Yellow Pages and other local directories, are becoming less important for consumers while the Internet is becoming significantly more important.

The full report, The UK Legal Services Market 2008 (64pp, PDF) , is available directly from IRN Research, priced at £350/€475/US$640.

IRN Research
Established in 1991 in the UK, IRN Research is a full-service market research consultancy and a member of the Market Research Society (MRS). IRN Research has a particular focus on the legal services market offering a range of bespoke research services, on an ad-hoc and continuous basis, to law firms and suppliers to the sector. These services include client satisfaction surveys, market studies and competitor intelligence, and strategic studies.

For further information contact David Mort on +44(0)24 76421821 or dmort@irn-research.com.

IRN Research, Concorde House, Trinity Park, Solihull, Birmingham, B37 7UQ, United Kingdom

Tel: +44(0)121 635 5210, Fax: +44(0)121 635 5211.

URL: www.irn-research.com

UK Legal Services Market 2008

Contents
Executive Summary
1. Industry Overview
1.1 Report Coverage & Introduction
1.2 Market Size
1.3 Market Characteristics and Trends
1.4 Market Segmentation
1.5 Industry Structure
1.6 Solicitor Numbers
2. Key Trends
2.1 Legal Services Act 2007
2.2 Alternative Business Structures (ABS) &
Legal Disciplinary Practices (LDPs)
2.3 Post Legal Services Act 2007 Initiatives
2.4 Legal Services in Scotland
2.5 The High Street Brands
2.6 Legal Aid Review
2.7 Community Legal Advice Centres (CLACs)
2.8 Legal Fees
2.9 Home Information Packs (HIPs)
2.10 E-conveyancing
2.11 Personal Injury Claims
2.12 Claims Management Companies
3. Selected Bodies and Associations in Legal Services
4. PEST Analysis
4.1 Political
4.2 Economic
4.3 Social
4.4 Technological
5. IRN Consumer Research
5.1 Introduction
5.2 Key Survey Results
5.2.1 Channels Used to Find Legal Advice
5.2.2 Results by Age
5.2.3 Results by Social Class
5.2.4 Ratings of Law Firms and Solicitors Used
6. Competitive Structure
6.1 The Marketplace
6.2 Leading Law Firms
6.3 Law Firm Profiles
Clifford Chance
Freshfields Bruckhaus Deringer
Linklaters
Allen & Overy
Lovells
Eversheds
DLA Piper Rudnick Gray Cary
Slaughter & May
Herbert Smith
Ashurst
Other Law Firms
Norton Rose
Simmons & Simmons
Denton Wilde Sapte
CMS Cameron McKenna
Hammonds
Addleshaw Goddard
SJ Berwin
Pinsent Masons
Berwin Leighton Paisner
Taylor Wessing
Clyde & Co
Irwin Mitchell
6.4 Local Law Markets and Key Firms
6.4.1 Scotland
6.4.2 Birmingham
6.4.3 Cardiff
6.4.4 Manchester
6.5 Marketing Activity
7. Future Trends
7.1 General Trends
7.2 Forecasts 2008-2009
7.3 Summary of Future Market Influences