The company simply grew too quickly – and the clear-up job is a painful one.

If the law doesn’t work out for Co-operative Legal Services (insert your own joke here) then perhaps a job as a gondolier beckons.

For this week the company has rowed back so far it is barely on the horizon.

Two years ago the talk was of rapid expansion and brushing aside the old duffers of the legal profession. It would be a one-stop shop catering for legal needs from cradle to grave.

The Co-op was the first of the big-name brands to secure an alternative business structure licence, stealing a march on other retailers. It even had a visit from then-justice minister Jonathan Djanogly.

The company was filled with so much hubris and bravado it was fit to burst. And that is exactly what happened.

With the ABS secured, the Co-op was talking of recruiting 3,000 new staff and populating its bank (hardly a success story itself, as it turned out) with legal advisers. CLS planned rapid expansion, safe in the knowledge that it had the financial backing of the group behind it.

Like a Russian oligarch taking charge of a football club, it even announced a top signing in the shape of TV Edwards partner Christina Blacklaws to join as director.

It was too much too soon, and the Co-op quickly realised the legal sector was not as easy it first seemed.

The government’s meddling in personal injury law, the stifling regulatory environment and the intense competition in the sector all made this a harsh landscape in which to take your first steps.

The company’s reliance on the trusted Co-op brand backfired spectacularly, to the point where it was becoming toxic.

In summary, the legal sector simply didn’t deliver the sort of revenue to make such rapid expansion viable.

And so to this week's announcements. I understand headcount is down around 20% on 18 months ago, with the idea of a 3,000-strong workforce almost laughable.

The company has had to lick its wounds, admit its mistakes and almost start again. This week’s report of £5.1m losses was startling, and should certainly interest the Solicitors Regulation Authority which licenses the Co-op’s ABS.

The losses were essentially the clean-up bill for the mess of the past two years – particularly dozens of costly redundancy payments.

The next year is make or break: the group surely cannot prop up a subsidiary haemorrhaging cash like this for much longer. The tide needs to turn now.

The Co-op’s struggles are not the death knell for ABS – nor even possibly Co-op Legal Services.

But they should certainly make companies think twice in future before announcing plans to take over the legal sector. As the much-maligned ‘traditional’ firms will tell you, this business isn’t as easy as you think.

Topics