The pain may just be starting for law firms – adapt or die ?

Bbegbies Traynor, the well know insolvency and business services company reported this week on what many law firms already know, things are gettng very tough.

The squeeze on the genereally smaller to medium sized practices has been building up for yeras, frankly there are too many lawyers and the bread and butter services such as conveyancing are dwindling with both the economic circumstances and a tougher, almost cartel like approach from lenders. Whilst we have some sympathy with solicitors, for some reason they simply don’t seem to react and plan like other businesses do, and now it really does appear that the s..t is hitting the fan.

According to Begbies Traynor :-

• it’s own ‘red flag alert’ considers that over 100 legal practices fell into a financial situation of “critical distress” in the last 3 months of 2011
• this is over a 60% rise from the previous year

Recation of many law firms is to merge with bigger practices, but will this be a suitable response if in turn those bigger practices, notwithstanding ecopnomies of scale, are still fighting over a finite and smaller number of instructions, with consequent squeeze on costs. This is a problem well known to conveytancers, where, even before the property market crashed, the fierce competition for instructions meant that competition on costs resulted in effective loss leaders in many cases. This is all before some non-legal brands, with much bigger resources and the ability to drive down costs further, have entered the legal market as ABS’s. All in all depressing times for solicitors who do not think more like business people and find profitable, expert niches.

What do you think ?