Hundreds of firms could go out of business after the Court of Appeal cleared the way for the lord chancellor’s reforms of criminal legal aid, the Law Society warned last week.

The Ministry of Justice reopened the tender process for duty provider contracts on Friday last week after the court dismissed an appeal by the Law Society and practitioner groups. Law Society president Andrew Caplen (pictured) described the ruling, which said the government’s approach was reasonable, as ‘a devastating blow’.

The tendering process had been suspended since December while the Law Society, Criminal Law Solicitors’ Association and London Criminal Courts Solicitors’ Association challenged Chris Grayling’s plans to reduce the number of criminal legal aid contracts from around 1,600 to 527.

Firms have until midday on 5 May – two days before the general election – to submit their bids. Labour has said it would scrap the two-tier contracts if it is elected.

Richard Miller, head of legal aid at the Law Society, expected fewer than 100 firms to win the 227 contracts in London. Outside London, where he expected delivery partnerships to be more usual, Miller speculated that 750 firms would service 300 contracts.

Around 200 firms, he said, currently operate without duty work. Assuming 50 of those firms who did duty work but did not get a contract survived, he said this would, in total, result in 500 firms going out of business. However, he stressed that this number was based on ‘informed speculation’ rather than new facts.

Miller said aggressive marketing for new clients may or may not prove to be an adequate substitute for firms who do not get duty work. Losing duty work, he said, would lead to an immediate reduction in a firm’s caseload. ‘The government’s plans are based on the principle that firms will need significant extra volume to absorb the fee cuts. In many cases absorbing the fee cuts and reductions in volume is likely to be unsustainable,’ he said.

Since the tender documentation was first published, Digby Johnson, partner at national legal aid firm Johnson Partnership, said his firm had already spent six full days and expected to devote another 15-20 days at equity partner level to working on its tender bids.

On top of that, preparing the bids would require the involvement of three salaried partners, two assistant solicitors and administrative staff. Johnson said it was a ‘ludicrous expense to put organisations through when we’re running on a very narrow shoestring, and when there’s a distinct possibility that [the scheme] might never come to be’.

Johnson said he still hoped the two-tier system would be scrapped. ‘We still think we would be in greater financial jeopardy if the system were brought in.’

On Thursday shadow justice secretary Sadiq Khan wrote to Dame Ursula Brennan, permanent secretary at the Ministry of Justice, asking whether the decision to launch a highly controversial tendering process for multimillion pound contracts in the final hours before election ‘purdah’, which begins today, complied with Cabinet Office guidance, and if she had sought instruction from the secretary of state in writing in order to restart the process.

The Law Society has published guidance to support members intending to start the tender process or set up delivery partnerships.