ABS licensing has gathered pace over the summer with August seeing a surge of licensing approvals. So far 28 licences have been granted with more in the final stages of the application process. It was always going to be difficult to predict the level of interest and type of structures that would emerge, but to date a picture of innovation and ingenuity is being painted by those looking to capitalise on the opportunities that ABSs present.
As the Ministry of Justice fired the starting gun for ABS licensing earlier this year, I made some confident assertions about the impact it would have on the market. I predicted that a measure designed primarily to give wider consumer choice in the high street would generate change throughout all levels and areas of practice. I suggested there was no reason why partnership should remain the default model. And I cautioned that with ABSs helping to foster a more flexible and innovative legal services market, competitors ignored this at their peril.
Six months in I stand by my assertions. A sole practice looking to expand its services to their clients, a large legal firm looking to attract external investment to cement its position on the global legal market, a private equity firm wanting to develop its portfolio of services, ABSs are permeating all sections of the market and all parts of the country – from London to Liverpool, Swansea to Stockton, Milton Keynes to Manchester.
ABS applications have proved to be highly innovative and forward thinking, whether they are existing legal bodies taking external investment to grow successful business models, proposing to grow by acquisition or creating joint ventures, or entirely new entrants to the legal services market looking to take market share in areas of law traditionally serviced purely by all-lawyer firms. The personal injury market remains a key area of interest for ABS applicants and one in which we are monitoring developments closely. Clearly what the SRA is now seeing in terms of applications will eventually bring about significant change in the market and we are at the very start of that change now.
Until now, predicting the impact of ABSs has been something of a guessing game. But we know this has been driven by the commercial imperatives and the level of competition that exist in the sector. These drivers should lead to improvements in service and enable greater co-operation across the legal and other professional services so that resources and knowledge can be pooled. Those running law firms benefit from gaining economies of scale and greater opportunities that more diverse and larger businesses can offer. Consumers benefit from the option to have all their legal and other related needs dealt with by a single organisation. As I warned, those who sit back do so at their peril.
And it is for the protection of those purchasing legal services that our process is appropriately rigorous. The application forms are detailed and our questioning is robust. At the same time, we recognise the need not to be bureaucratic and we only request the information we need, balancing our roles of supporting a better legal services market while ensuring a safe marketplace for consumers.
As our experience and knowledge develop, we are keen to continually improve the application process. We have already issued additional guidance in the light of the experience of the early adopters. And we will shortly be undertaking a review of all stages of the process, talking to applicants about their experience and making improvements while ensuring the same rigorous standards are maintained.
Authorising ABSs is, of course, only part of the picture. Supervising these new firms to ensure they are producing the right outcomes for consumers is now business as usual for us. Our supervision team is engaging with newly licensed ABSs, visiting firms to discuss issues and to get a picture of the firm. This is a two-way process and initial feedback from firms following these visits has been positive, using us as a sounding board as they look to develop their business.
We will not be able to prevent a failure of an ABS as a result of market forces, and it is not our duty to do so. But by identifying issues we can support the delivery of competent and ethical legal services and mitigate consumer detriment when things do go wrong.
The licensing of ABSs has been fundamental to the transformation of the SRA from a regulator of solicitors to a regulator of a wider range of individuals and entities. To meet our new regulatory objectives the SRA has needed to adapt to become more responsive and efficient and our move to central Birmingham, a fast-growing hub for business and legal services, is a crucial milestone. From 1 October, following a phased move, the SRA’s new headquarters in The Cube building will be open for business.
The move to Birmingham will bring significant benefits. Moving our Midlands-based staff, currently located in Leamington Spa and Redditch, into one location will make us more efficient and streamlined, the excellent transport links will make us more accessible, and being in central Birmingham will help us to attract high-quality staff from a diverse population. Our contact centre number will remain the same – 0870 606 2555.
Charles Plant is chair of the board of the SRA