Closures, insolvencies and forced mergers: troubled waters in the legal market

Closures, insolvencies and forced mergers: troubled waters in the legal market

By Simon Goldhill

There are around 10,000 firms of solicitors in England and Wales, generating over £25bn in revenues annually. 85% are small high street firms with an average turnover of £1m. There are some very big players (the top 200 account for 62% of those revenues) and also some that are very small.

Until recently, failures were almost unheard of. However, financial reality is perhaps starting to take hold. We have now witnessed a number of significant regional and national players hitting the dust and the headlines – Halliwells, Blakemores, Challinors and Cobbetts.

But that doesn’t tell the whole picture. According to an analysis of the sector by professional services consultancy Begbies Traynor, nearly 200 smaller firms went bust in just the 3rd quarter of this year, with the number in financial distress amounting to around a quarter of the entire market.

Some sense of what is happening and why may be seen from work that The Solicitors Regulatory Authority (SRA) is undertaking as part of its Financial Stability Project. The outcomes to date are rather startling.

The SRA has developed a number of key financial stability indicators, including:

  • Drawings exceeding net profits (“It may sound obvious… but we see this all the time” according to SRA Executive Director Samantha Barrass).
  • Borrowing exceeding net profits.
  • Borrowing beyond a level of prudence.

The result? The SRA has now identified 1,200 firms at risk. Over 200 firms appear to be under intensive supervision, including around 30 of the top 200.

And the reasons?  A progress report on the Financi

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About the author:

Simon Goldhill is a business builder, strategic planner, and troubleshooter with over 30 years experience of the legal market.

The first 20+ years was as a solicitor at a number of City and Central London commercial firms. In addition to a successful practice as a commercial litigator, he also had senior management roles, including heading departments and setting up a new firm.

He then left practice and co-founded InterResolve, the UK’s first volume mediation business, which he successfully built from concept through to institutional investment.

Simon is now focused on strategic consultancy, working with innovators in the liberalised legal market. His work has included advising major national brands and developing new volume business and operational models for delivering legal services to consumers and SMEs.

 Simon Goldhill Consultancy

Simon Goldhill Consultancy works with innovators, providing strategic consultancy, advice and project work around the newly liberalised legal services market.

Coupled with other major developments in technology, consumer/client engagement and fee structures, this market will see large-scale and disruptive structural changes to how legal services are marketed, delivered, regulated and paid for in the coming years.

Its work has included advising major national brands and developing new volume business and operational models for delivering legal services to consumers and SMEs, in particular where volume and scalability are features.