UK Legal Market Trends, June 2015 provided by IRN Research

Our regular update on the UK legal market keeps you up-to-date on legal market revenue trends, plus highlights selected survey and research data on the market. There will also be news of key initiatives and issues.
 

In this issue:

  • April 2015 legal market turnover growth of 11.9% according to ONS
  • Law firm numbers continue to fall but solicitor numbers still growing
  • More growth in individuals undertaking DIY probate in 2014….and 2015
  • Stronger competitive pressures in conveyancing
  • Conveyancers’ confidence is growing
  • Large law firms expecting revenue growth of 5.3% in FY 2015-16
  • Obtaining professional indemnity insurance is becoming easier
  • Many law firms have yet to embrace client feedback
  • Lawyers are sensible savers but need to save smarter
  • ABS in June 2015 – Chinese law firm for Chinese business     
  • M&A activity in the legal sector in June

To download this document as a pdf click here

This report was compiled and provided by:

IRN Research, 60 Eastern Green Road, Coventry CV5 7LH, UK
www.irn-research.com

dmort@irn-research.com

 

April 2015 Legal Market Turnover Growth at 11.9% according to ONS  

Provisional April 2015 data from the ONS shows strong growth in the UK legal market of almost 12% compared to April 2014.
 

Table 1: UK Legal Services Turnover April 2013-April 2015 (£m)
 

 

2013

2014

% change

April

2767.5

2757.2

+0.4%

May

2219.0

2161.2

-2.6%

June

2307.0

2430.7

+5.4%

July

2655.9

2575.7

-3.0%

August

2164.8

2219.1

+2.5%

September

2293.3

2495.7

+8.8%

October

2725.5

2918.8

+7.1%

November

2464.3

2481.2

+0.7%

December

2327.4

2630.9

+13.0%

 

 

 

 

 

2014

2015

 

January

2475.6

2543.0

+2.7%

February

2201.0

2401.4

+9.1%

March

2707.1

2878.6

+6.3%

April

2757.2

3085.5

+11.9%

 

+ - Including patent/copyright agents, barristers at law, solicitors and other legal activities
Note: monthly figures may have been revised from previous official statistics reports
Source: National Statistics/IRN Research

 

Law Firm Numbers Continue to Fall but Solicitor Numbers Still Growing

According to the Solicitors Regulation Authority data, there was a net loss of 155 law firms between May 2014 and May 2015 and there has been a net loss of over 500 between June 2013 and May 2015.  

Table 2: Law Firm and Solicitor Numbers, May 2013 – May 2015
 

 

May 2013

May 2014

May 2015

% change 13-15

Law Firms

10,875*

10,519

10,364

-4.7%

Total solicitors

165,519

166,119

167,503

+1.2%

Practising solicitors

126,624

129,552

132,520

+4.7%

* - June 2013
 

Source: Solicitors Regulation Authority (SRA)

Incorporated companies now account for well over a third of all law firms (35.1% in May 2015) compared to only 28% in June 2013.

 

Figure 3: Law Firms by Business Model, May 2015 (%)

 

 

Source: Solicitors Regulation Authority (SRA)

 

More Growth in Individuals Undertaking DIY Probate in 2014…and 2015

Until this year, probate data for England and Wales was only published annually by the Probate Service but on the 25th June the Family Court Statistics Quarterly introduced new tables providing quarterly summary casework statistics from the Probate Service from Q1 2015 onwards. This latest quarterly also included the first publication of the annual 2014 data.

  • The number of grants of representation in 2014 fell by 5% to 247,298 compared to the previous year.
  • In 2014, 63.5% were issued to solicitors. While solicitors still take the majority their share has slipped from 70.4% in 2007 as more individuals undertake the probate themselves.
  • In 2007, private individuals only accounted for 29.6% of the total grants of representation but, by 2013, this share had increased to 34.9% and, in 2014, it was 36.5%. Apart from a blip in 2012, the share taken by private individuals has been increasing since 2007.
  • In the first quarter of 2015 there were 64,627 grants of representation issued and over 37% were to private individuals.

    (Note: Probate is the court’s authority given to a person or persons to administer a deceased person’s estate and the document issued by the Probate Service is called a Grant of Representation)  

Table 4: Probate Service - Number of Grants of Representation in England/Wales, 2009-2014

 

 

2009

2010

2011

2012

2013

2014

Probate

196,245

191,632

207,107

189,599

203,556

192,892

Letters of administration with will annexed

15,223

14,858

15,553

16,110

18,268

17,311

Letters of administration

42,696

40,145

38,692

37,753

39,145

37,095

TOTAL

254,164

246,635

261,352

243,462

260,969

247,298

TOTAL % change

-5.0%

-3.0%

+6.0%

-6.8%

+7.2%

-5.2%

Contested cases

152

120

135

98

97

178

Notes:
Probate – when a deceased person left a valid will and an executor is acting
Letters of administration with will annexed – when left a valid will but no executor is acting

Letters of administration – usually when there is no valid will  

 

Contested cases – dealt with by the Chancery Division of the High Court

 

Source: Judicial & Court Statistics (annual), Family Court Statistic (quarterly) for 2014 data
 

https://www.gov.uk/government/statistics/family-court-statistics-quarterly-january-to-march-2015

Stronger Competitive Pressures in Conveyancing

Competition is heating up in the conveyancing market according to the latest Conveyancing Market Tracker from Search Acumen, the search provider. Based on Land Registry data, the latest survey shows that transactions fell 16% in the first quarter of 2015. Key findings:

  • Transactions fall faster than the number of active firms in the market
  • Conveyancers work harder for business as average transactions per firm fall 14%
  • Biggest firms feel the biggest short term impact, but the top five still account for 61% more transactions than three years ago

The Tracker – which uses Land Registry data to assess competitive pressures in the conveyancing market – also reveals fewer firms were active during Q1 2015, with an average of 4,177 registering transactions each month, down -2% from 4,259 in Q4 2014 and -4% from 4,330 in Q1 2014.

Search Acumen’s analysis shows total transactions have fallen faster than business numbers both quarterly and annually. This has been influenced by tougher lending rules which have reined in the housing market – including the Mortgage Market Review (MMR) and subsequent actions by the Financial Policy Committee (FPC) – along with a degree of uncertainty ahead of the election.

As a result, the average conveyancing firm recorded 57 transactions during Q1 2015: just below the 58 clocked up a year earlier and down -14% from 67 in Q4 2014.

Table 5: Transactions Compared to Total Active Firms

 

Q1 2014

Q4 2014

Q1 2015

Year-on-year change

Quarterly change

Total active firms

4,330

4,259

4,177

-4%

-2%

Total transactions

251,042

284,427

238,688

-5%

-16%

Average transactions per firm

58

67

57

-2%

-14%

Source: Conveyancing Market Tracker, Q1 2015. Search Acumen

The Conveyancing Market Tracker indicates that the bigger firms felt the greatest impact of the Q1 slowdown. Average quarterly transactions among the top 1,000 conveyancers fell to 173 in Q1 2015, -16% from 207 in Q4 2014 and -5% from 182 in Q1 2014.

More survey results at:
http://www.search-acumen.co.uk/Viewer/News/Press-release.aspx?.NewsType=c8969e71-47a7-4a0e-84cd-44e85a8b3a21
 

Conveyancers’ Confidence is Growing

 

The above suggests that competitive pressures are growing but another survey points to growing confidence from the conveyancers themselves. Conveyancers’ confidence in the market is rising, according to SearchFlow’s latest Conveyancer Sentiment Survey published on the 23rd June. 66% of solicitors have seen their volume of conveyancing work increase so far this year, compared with 52% at the end of last year.
 

The survey pooled the views of 128 conveyancers across England and Wales between January and May 2015 and findings revealed positivity in market forecasts. Looking forward to the end of 2015, 44% of those surveyed believe that the market will improve. One of the reasons behind the shift in market confidence is thought to be the reforms to stamp duty taxes, announced six months ago. Five times as many conveyancers cite these reforms as having a positive market impact rather than a negative one (55% compared with 9%).
 

The survey adds that latest figures released by the Bank of England earlier this month reinforce SearchFlow’s findings. It has been reported that the number of homebuyer mortgages approved by high street banks has seen the biggest rise since 2009, further indicating that housing market stability is increasing again.

 

There were 63% of solicitors seeing the biggest volume of growth through direct business,

Source:
https://www.searchflowuk.co.uk/news/property-market-confidence-up/

Large Law Firms Expecting Revenue Growth of 5.3% in FY 2015-16

 

The latest Quarterly Legal Sector Survey from Deloitte covers the last quarter of financial year 2014-15 to the end of April 2015. The survey reports an average increase in fee income for Q5 2014-15 of 6.7% with two-thirds of this attributable to an increase in fee earners from M&A activity and lateral hires. The remaining third comes from an increase in chargeable rates and billable hours.

This increase hides significant variations between law firms with those focusing on the London market generally performing better than either those with significant international businesses or those with significant work in the UK but outside London. During the economic downturn, law firms with a large presence overseas were able to cushion the blow of weak demand in the UK by attracting more international business. It now seems that a combination of economic troubles in a number of overseas jurisdictions, plus a reduced sterling/euro exchange rate is having a negative impact.

Law firms are relatively optimistic about revenues in financial year 2016 with the survey producing expectations of 5.3% revenue growth in this year. However, many law firms are concerned about increases in costs weakening profits.

A webcast on the latest survey, plus an application for the full report is at:
http://www2.deloitte.com/uk/en/pages/business-and-professional-services/articles/quarterly-legal-sector-survey.html

 

Obtaining Professional Indemnity Insurance is Becoming Easier

The Law Society has published the results of its annual professional indemnity insurance renewal survey (undertaken in mid-April). The results present encouraging feedback for small-firms in particular. Solicitors generally found the process easier, with more firms being able to obtain affordable, rated insurance.

The small-firms sector, traditionally under catered for, particularly benefitted from the increased presence of rated cover, with a large number of firms presumably forced to turn to unrated insurers previously able to switch. This was reflected in the figures the report presented with 83% of firms selecting rated cover in 2014, up from 77% in 2013.

Smaller firms responding to the survey said the biggest influence to their purchasing decision was the financial rating of the prospective insurer from Standard and Poor’s or A.M Best, rather than simply the cost of the policy. Thankfully, firms were delivered a respite as the survey showed that premium levels largely remained flat, while trade during the period was spurred by a growing UK economy.

The additional capacity of rated insurers clearly contributed to a reduction in the number of firms being forced to enter the Extended Indemnity Period. Numbers fell from 287 in 2013 to just 39 in 2014. The survey has also shown that firms have appreciated the variable renewal date introduced in 2013, with 19 per cent of respondents having taken out a policy outside the traditional 12-month duration.

One fifth of survey respondents did however indicate that they found the renewal process difficult, primarily because of the time it takes to submit a proposal. Half of all firms responding to the survey indicated that they spent up to a month between preparing proposal forms and agreeing to take out a policy.

Other results can be found at:

http://www.lawsociety.org.uk/news/press-releases/professional-indemnity-insurance-survey/

 

Many Law Firms Have Yet to Embrace Client Feedback

Through the Grapevine is an article from IRN Research Director David Mort published in the June issue of Private Client Adviser. It highlights that many law firms are completely undervaluing the potential of client feedback and word of mouth recommendations for business development and marketing.

At the most basic level, there are still too many law firm private clients that are not even asked for feedback as an annual YouGov survey shows. The survey asks private clients of law firms if they have been asked to complete a satisfaction survey. Only one in five of those surveyed in 2015 were asked to do so and little has changed since 2013.

Table 6: Client satisfaction surveys - % of private clients completing, 2013 - 2015

 

 

2013

2014

2015

Yes

20%

24%

20%

No

64%

56%

62%

Don’t Know

16%

20%

18%

Total

100%

100%

100%

 

Base: 581 adults (2013), 618 adults (2014), 814 adults (2015) using a solicitor/law firm in the last 3 years

Source: YouGov Reports Legal Services Reports, 2013-2015

Original article source at:
http://www.privateclientadviser.co.uk/feature/legal-practice/through-grapevine  

Lawyers Are Sensible Savers but Need to Save Smarter

Most lawyers are regular savers, but need to plan properly if they are to achieve all their saving goals, according to new research carried out by Wesleyan, the specialist financial mutual for lawyers.

Wesleyan found nine out of 10 lawyers save regularly, typically putting aside more than £250 a month towards their future spending plans. Most lawyers surveyed have already built up a savings pot of, on average, £25,720. The research showed the most popular saving goals for lawyers are:

  • Having enough money set aside to cover nine months' salary
  • A new car
  • A deposit for a new home

At today's prices, it would cost £288,370 over a lifetime to cover all of these items.

For those lawyers saving £250 a month, it could take them up to 54 years to reach this amount if they were saving into a Cash ISA paying, for example, 2% AER interest -- and even then they would need to leave those savings untouched during that time.

* Based on saving £250 per month into a stocks and shares ISA with an average annual return of 8.6%. Figures based on the average percentage growth rate (PGR) over the past five years of the Wesleyan ISA With Profits Fund. Past performance should not be taken as a guaranteed indicator of future returns and the value of your investment can go down as well as up, so you could get back less than you have invested. Saving £250 a month with this rate of return would enable a lawyer to build savings of £288,370 in 26 years.

Further details at:
http://www.wesleyan.co.uk/about-us/mediacentre/pr/Lawyersaresensiblesaversbutneedtosavesmartertofulfiltheirambitionsresearchreveals

ABS in June 2015 – Chinese Law Firm for Chinese Business

YangTze Law is a new Chinese law ABS in London which is working with Exeter-based Michelmores. The firm will target Chinese companies looking to invest abroad. Michelmores will provide legal back office and regulatory support to the new ABS.

Also launching an ABS in June is Leyton UK Partners, an international consultancy specialising in research and development grants and tax credits, which will use the ABS to offer a wider range of employment law services to its SME clients. Leyton is a London-headquartered ‘cost-optimisation consultancy’, with centres in Europe, North Africa and Canada, and a £45m turnover. The company, founded in 1997, claims to have saved more than 4,000 clients a total of £225m. It plans to expand its HR services and employment advice arm to complement to its core consulting business focusing on R&D tax relief and credits, and R&D grants.

Other ABS in June are:

  • Legal Resources & Collections Ltd (LRC) – offering a range of debt recovery services from its base in Nottingham. LRC was formed in 2002 out of Eversheds in Nottingham.
  • Sheldon Davidson Solicitors Ltd – a personal injury/clinical negligence solicitor in Manchester.
  • Woodwards (Industrial Disease) Ltd – a new business set up in Lancashire focusing on industrial disease claims. This is the second ABS from Woodwards following ABS Woodwards (Personal Injury) Ltd licensed in July 2014.
  • Merit Legal Ltd – Merit is trading as MLL Solicitors in Birmingham and is focusing on commercial litigation and insolvency. It will also offer advice on US migration law and US IP law via its US affiliates.
  • Farnworth Rose Ltd – set up in 2007 and general law firm practice with offices in Nelson and Barrowfield in Lancashire.
       

 

M&A Activity in the Legal Market in June

Leading law firm Eversheds has bought German law firm Heisse Kursawe and the acquired firm will be merged into Eversheds Deutschland LLP.

Other M&A deals in June include:

  • After Cartwright King announced its merger with Garstangs Burrows Bussin (GBB) last month, it has another merger this month with Macnab Clarke based in Abingdon. The Abingdon firm are specialist criminal defence lawyers and the merger will take place on 1st July 2015. Cartwright King will then have 18 UK offices.
     
  • Cambridge-based Hewitsons is merging with London firm Moorhead James. Hewitson Moorhead will have 46 partners, 120 legally qualified staff, and a turnover of over £16m. There are four offices in Cambridge, Northampton, Milton Keynes, and London.
     
  • Brachers has purchased Maidstone-based Watson Nevill.
     
  • The Cheltenham office of Lodders has doubled in size following the acquisition of Jordans Solicitors. Lodders has offices in Cheltenham, Stratford-upon-Avon, and Henley-in-Arden.
     
  • Express Solicitors has purchased the existing PI WIP of Ashfields Solicitors in Cheadle, a firm in administration. The purchase covers 450 PI files.
     
  • North-west firm Garratts, which left the QualitySolicitors network recently, has  acquired Manchester firm Heath Sons & Broome.