Summertime blues as 250 law firms shut

More than 250 law firms have ceased conducting business since the start of summer, but observers are divided on whether the trend is the first sign of long-awaited consolidation or a statistical blip.

Data published this week by the Solicitors Regulation Authority show a total of 11,115 firms on 1 September, down from a record 11,369 firms at the end of May. It is the first time since the economic downturn that law firm numbers have fallen for three consecutive months.

Tony Williams, founder of Jomati Consultants, described the net fall of general practice firms as ‘significant’, given the number of solicitors leaving large firms to set up their own specialist practices. Reasons for the drop include the subdued conveyancing market and higher costs of running a personal injury practice, he said.

However a spokesman for the Law Society queried the significance of the fall. He said: ‘August 2012 shows more registered firms than August 2011 or August 2010, and a decrease of 0.5% on July 2012. This looks like statistical noise rather than any significant downward trend.’

In recent years, the summer months have seen modest increases in law firm numbers, with a drop usually in the autumn coinciding with the renewal season for professional indemnity insurance. In the past three months, sole practitioner numbers have fallen by 126 and partnerships by 165.

Analysts have long predicted a steep decline in law firm numbers as partners seek an exit strategy or look to merge with other firms amid a liberalising market. But numbers have held up and even increased – with 1,053 firms opening in the 12 months to June 2012.