Reforms: cashflow problems are still firms' biggest worry

SMALL to medium-sized firms are bracing themselves for a cashflow shortage when legal aid is withdrawn from personal injury cases, but many believe they will increase their earnings in the long run.

These are the key findings of a survey of law firms in the national network LawGroup UK, which was commissioned by The Lawyer.

The survey, of 39 small to medium-sized firms, confirms elements of both the Law Society and the Government's research into the impact of the reforms.

All 39 firms in the survey said they anticipated cashflow problems because of delays in the payment of costs and the financing of disbursements.

The finding tallies with the conclusion of a study of similar sized firms undertaken by Sheffield University Law Faculty, which was commissioned by the Law Society and predicted that firms would be plunged into debt in the first few years of the new regime.

However 42 per cent of the respondents in the LawGroup UK survey said they believed they could make more money out of the reforms. Fifty-three per cent said their fees would either remain the same or go down, and 5 per cent were not sure.

Stuart Francis, LawGroup UK corporate marketing manager, said an analysis of the responses showed that those firms which were confident of their firm's risk management capability were the ones who anticipated higher fees.

He said these firms believed they would be able to charge higher rates than they receive for legal aid work.

However, those firms which were less optimistic about their prospects believed that consumer pressure and competition would drive fees down.

Elsewhere in the survey, 68 said the new arrangements would encourage the public to pursue cases, but 63 per cent did not think the public would prefer the new arrangement over the existing legal aid system.

David Hartley, head of solicitors' remuneration at the Law Society, said the survey backed up the findings of the Sheffield report.

He said firms with cashflow difficulties would not be able to help the poor fund conditional fee actions.

“Unless a solution is found to this problem I cannot see how the Government can proceed with its plan to withdraw legal aid.”