Almost a fifth of law firm managing partners in north-west England are considering closing down their firm, according to a survey published today.
The poll of 300 firm leaders by Liverpool firm O’Connors found the vast majority of respondents believed that planned changes to civil justice would reduce their profits.
More than a two-thirds of firms that currently pay referral fees – which will be banned from April – say they will continue doing business with third-party referrers.
According to the survey, conducted last week, 71% of managing partners are actively trying to restructure arrangements so that cases are ‘self-referred’ by potential claimants on the recommendation of a claims manager in the hope that this will avoid the ban.
Around half of managing partners were planning to increase their own direct marketing spend to attract new clients, rather than buying them in.
Pressure on firms has been compounded by the imminent reduction in Road Traffic Accident (RTA) Portal fixed-fee rates and a planned extension to the portal being introduced by the government in the next few months.
More than 90% of the firms surveyed handle portal work and virtually all of them expect the planned changes to make their personal injury divisions less profitable.
Around a quarter of them believe profitability will drop by 50% with one in 10 believing it will drop by as much as 80%.
O’Connors’ partner Nigel Wallis said: ‘This survey shows the high level of stress on this important sector of the legal economy which employs tens of thousands of people in the north-west and provides access to justice to many thousands of accident victims every year.’
Meanwhile, the Civil Justice Council has recommended that the government create a central register of claims and clamp down on fraudulent claimants rather than raise the small-claims limit.
The independent advisory body has told the Ministry of Justice there is little evidence to growth in whiplash claims with an increase in fraudulent or exaggerated claims.
In its response to plans to raise the limit from £1,000 to £5,000, the CJC said reform was ‘unnecessary and potentially costly’ and should be put on hold until the Jackson reforms and cuts to fixed recoverable fees for RTA claims have taken effect.
The government is due to make an announcement on the small-claims limit in the summer after the consultation closed earlier this month.
The CJC response said: ‘It may be that further changes at this point will not be sensitive to the post-April environment, and would undoubtedly add to the pressures on parties, practitioners and judges adapting to it.’
If the government is committed to reducing fraudulent or exaggerated claims, the response outlined, ministers should make greater use of sanctions to deter them. This would involve greater use of the power to strike out claims, cost sanctions, the court’s contempt power and, in appropriate cases, criminal prosecution.
The CJC, which is chaired by the master of the rolls, also called for a mechanism, through a central register of claims, for data-sharing which might help deter repeat claimants.
The request for a pause in personal injury reform comes as more MPs have signed an early day motion concerned at the pace and extent of change in the motor accident claims system.
There are now 20 signatories including three Liberal Democrats and Respect’s George Galloway.