UK 200: New Model Law and the ABS providers

The implementation of the Legal Services Act has brought a range of new players into the UK market while at the same time outfits such as Axiom, offering ‘alternative legal services’, have gained momentum.

All this is bringing monumental change to how the legal market is segmented. The traditional law firm may continue to dominate the market but management there is starting to ask questions about how resources are deployed. This is only encouraged by the presence of players such as Co-operative Legal Services in the ABS market, PwC Legal in the accountancy sector and Axiom, LoD and Riverview as prominent alternative legal service providers.

In this year’s full UK200 report The Lawyer analyses the key players in this alternative space and charts their development over recent years. The list is by no means exhaustive, with new entrants coming in all the time with novel ways of gaining a route to market.

This report is intended to give an insight into how the new sector is developing, where the successes have been as well as the challenges.

It will be some time until we see exactly what impact the presence of private equity is having, or indeed the presence of major corporate players. There are challenges when it comes to deciphering revenue from providers such as Parabis, which has set up a series of ABS partnerships with major insurance players, most recently RSA.

For in-house counsel the arrival of new players in the market can only bring about increased competition. Those under pressure to cut budgets can see that this developing sector provides an impetus for change for all.

While many still cling to traditional law firm relationships, there is no doubt that the legal market is in the midst of a major shift from which there will be no going back.

This section also looks at the arrival of private equity money in the legal sector as well as the entry of major players such as Co-operative Legal Services (CLS). There have been some success stories in this area, but not all is rosy for those operating in the personal injury (PI) claims market.

The implementation of the Jackson reforms through the Legal Aid, Sentencing and Punishment of Offenders Act in April 2013 effectively cut profit margins in the PI sector in half.

Not all have been forthcoming with their most recent financial figures. Early indications are that firms in the PI sector are investing heavily in technology to drive up volumes and streamline systems. The most recent solicitor numbers have not been made available by every firm, but sources suggest major outfits such as Parabis are adjusting to the new world by cutting back. That means office closures as well as redundancy consultations.

Private equity money has not been the panacea some expected. Neither has corporate capital, pumped into the sector by players such as CLS and BGL Group – the company that brought up Minster Law. It is a sector in flux and one that is trying to get to grips with a new world order.

This is an edited version of the full analysis on the ABS market, which includes the financials of dispersed legal firms, the accountants and private equity-backed legal services suppliers.