Rise in number of distressed law firms
New figures show that the number of law firms in distress has risen dramatically.
This could be made worse by the introduction of alternative business structures (ABSs) under the new Legal Services Act, according to research by Begbies Traynor.
The firm has issued its quarterly ‘red flag alert’ which shows that 163 professional services businesses were facing ‘critical’ distress in the last quarter of 2011. This is an increase of 61% compared to the same period in 2010 and Begbies Traynor says the majority of these were legal firms.
According to the alert, the last quarter of 2011 saw some non-legal businesses finalise plans to offer legal services ahead of 3 January 2012, when applications for such practices could officially be received.
However, while the Legal Services Act presents opportunities for non-legal firms, many law practices have found themselves ‘floundering’ as clients cut back on their legal fees spending, the alert adds.
Michael Bernstein, a partner at Harris Lipman, said many smaller legal firms were left wondering what to do next due to the uncertainty raised by the Legal Services Act.
He warned that this was not a viable strategy and urged firms to make a positive decision about their future, rather than simply waiting to see what happens.
Source - Harris Lipman