First4Lawyers: we’re recovering from ‘tumultuous change’ in PI market

Topics: Personal injury & clinical negligence

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One of the country’s biggest claims management companies says it is bouncing back from a year when profits dipped 15%.

First4Lawyers accounts for the year ending 31 March 2015, show that profit before tax fell from £2.626m to £2.2m in the course of 2014/15.

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Turnover also took a hit, dropping 14% from £13.2m to £11.47m.

The figures give an insight into the continuing fluctuations in the personal injury market as companies and law firms find ways to maximise profits following the referral fee ban and fee cuts which came into force in April 2013.

A spokesman for the Yorkshire-based company said the 2014/15 year was a period of ‘tumultuous change’ for the PI industry but that First4Lawyers has ‘weathered the changes arising from the Legal Aid, Sentencing and Punishment of Offenders Act [which banned referral fees] well’.

She added: ‘The results are largely as we expected, with PI firms tightening their belts and reducing the number of cases they took from us during this period as they first grappled with the changes. ‘However, this initial retrenchment is now being reversed and we are again seeing PI firms increasing the cases they take from us.’

First4Lawyers said it improved its gross-margin percentage against turnover and made investments in staff and infrastructure to work in a wider spread of legal services.

In May 2015 the company diversified into employment, property, wills, finance, family and motoring law, setting up a call centre of 38 staff to manage the new work streams and send out claims initially to a small number of its existing panel of law firms. Its TV advertisements feature former tennis player and radio host Andrew Castle (pictured).

According to the accounts, staff costs increased from £711,734 in 2014 to £949,369 in 2015, with the amount paid to the highest-paid director increasing from £112,500 to £185,575.

Readers' comments (10)

  • What service does this outfit provide for a client which the client could not have provided for them by a firm of solicitors?

    Put more bluntly, what is it that distinguishes this outfit from a wholly needless parasite whose existence adds no value to man or beast, and serves only to enrich itself?

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  • I should say, for the avoidance of any doubt (and lest the censor's eye should hover over my above post) that I do not call this outfit needless parasites; rather, I question what separates them from an entirely separate, notional, fictitious set of needless parasites.

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  • Anon

    These outfits exist because solicitors believe they want and need them. Why else would they pay such firms to find clients.

    It is not that lawyers cannot do the same work, it's just that they have not, in general, got a clue where to start, and see the receipt of a fully packaged case as a safer way of using their budget as against spurious marketing that may render zero return.

    Of course, they are totally wrong and their actions have caused major reductions in profit margins for their own firms at the same time as enriching CMC's.

    We cannot refer to the CMC's as parasites as they only have one sector that buys their services.

    They would disappear rapidly if lawyers chose not to pay them, but we all know that is not going to happen.

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  • They have got themselves positioned between the clients (the demand) and the lawyers (the supply). Some would say, lawyers got themselves between the clients and their remedy, and that we are just middlemen as well.
    Either way, when there is too much money sloshing about (which used to be the case), spivs and middlemen will intercede. Look at football agents, financial services generally, and solicitors for the last 15 years, since the Accident Group.
    I need another drink.

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  • A drop in profit of 15% How dreadful (not )

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  • Its a good job referral fees were banned....oh wait, you can join a "marketing agreement".

    I agree that Lawyers have themselves to blame. Buying in claims rather than using your own skill/technology to bring in leads has formed this market.

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  • "...we are again seeing PI firms increasing the cases they take from us." I'm loving the use of the word "take". Turnover was over £11m, presumably all "given" by the solicitors to balance the "taking" process. It's all the costs of roughly 22,000 bog standard Portal claims, for example. In a way it is ironic. Since the first referral arrangements, despite doing all the work and taking all the risk, the solicitors were always the poor relation - the majority of recoverable costs went to the claims referrer. But the majority of their income in turn went to the various advertising companies. Plus ca change...

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  • We solicitors have to take a long hard look in the mirror and realise that by supporting such firms we have killed the 'goose that laid the golden egg' . As we all scrabble around to change our service offerings and overhaul our business models it would be at least of some comfort to see these outfits forced out of business by the current proposed changes. Sadly however, I fear that all that will happened is that they will indeed 'fill the vacuum' left by PI solicitors (despite what the MOJ says) and we will be left in this strangely ironic situation where the poacher has turned gamekeeper and the intended consequences of the reforms are thwarted by aggressive, lightly regulated marketing activities of these non professional companies. The consequences for claimant consumers are almost too dire to contemplate.

    If we had rejected such claims marketing companies from day one (as many of us pleaded with the LS to do at the time, by way of a ban) then I suspect many of the of the negative changes to the PI landscape that have come in over the last 15 years would never have happened. It is just all very sad.

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  • Put it another way... Solicitors manage to reduce overheads by 15% whilst their income is halved.

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  • The first comment, with 62 likes looks a bit silly, with a firm with a 11.47 million t/o albeit reduced. Does that not prove they can provide what law firms want ? Yes, if is is a necessary evil, come out - do it yourselves and fail ? and/or spend a fortune. Please get real.

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