Is the future for many High Street firms sustainable or are we close to seeing the shakeout that has been predicted for some time now as control of the distribution channels for traditional work is lost to new entrants and a smaller number of large players?
Perhaps the most vulnerable, at the moment, are those High Street firms exposed to personal injury work where a shakeout is widely predicted as the Jackson reforms take effect. According to Law Society research personal injury accounts for over 15% of High Street (firms outside the Top 200) income – the largest segment. The margins on this work has fallen significantly. It seems likely that this work will continue to consolidate around a few larger players who have access to the organisations who distribute this work, who may be investors in the venture. With access to external capital these players can afford to build increasingly large businesses based on thinner margins and higher volumes.
Firms with high exposure to PI work could well find themselves in difficulties now their pre Jackson case load is close to completion.
Residential conveyancing accounts for about 12% of high street income and the good news for these firms is that volumes and prices are increasing compared with the bottom of the market when transactions were about half what they were 5 pre-recession. However, large players who control the distribution of residential conveyancing work are becoming more prominent in this part of the market too. They threaten to divert more and more of it away from the high street into their hands. Countrywide is the number one estate agency in Britain by transactions and revenues. It is no coincidence that Countrywide Property Lawyers, claims to be the largest conveyancing business in the UK. It wants to control more than 10% of it in the near future and My Home Move also has similar ambitions.
Wills and probate, a traditional bastion for high street firms accounting for over 10% of revenues, isn’t immune from this trend. The Co-op has its funeral business as a natural distribution channel to its ABS law firm. The ICAEW successfully submitted its application to become a regulator of probate services (and ABSs) so approved accountancy firms can do this work without needing a qualified lawyer at all.
With access to distribution channels, plenty of capital, and a real focus on technology and customer service these increasingly important players pose a real threat to High Street firms over the next few years, even as the economic outlook improves.
Of course, some High Street firms will survive and prosper as they find a niche for themselves as the “family solicitor” offering a more personal and local service. Brand differentiation and client development are keys for success and High Street firms that focus on this should not only hold their own but prosper as they will no longer be competing on prce alone.