More than 2,000 law firms are at risk of failure in the next year because of competition from alternative business structures (ABSs).
That is the claim of insolvency trade body R3, after studying data from Bureau van Dijk’s ‘Fame’ database. The figures, which place existing businesses in one of five bands depending on the risk to their solvency, found that 29.1% of firms in the UK and Ireland were either in the ‘caution’ or ‘high-risk’ categories.
R3 president Lee Manning said this was significantly higher than the 21.8% average across all business sectors – and reflects the challenge posed by newcomers to the profession through the involvement of non-lawyers.
‘New specialist firms will begin to emerge and they will be difficult for the high street to compete with, partly because small practices cannot afford the level of branding and marketing that these new firms will be able to take advantage of,’ he said.
'It is also unlikely that they will have the resources or the technology to compete with these ABSs.’
Manning, whose group is made up of 97% of insolvency practitioners, said law firms should be seeking advice on professional restructuring if they had any concerns about their financial future.
The Fame database contains research on thousands of companies from across the world, specialising in online information and performance figures.