Law firms should be looking to cut costs and outsource some legal work to compete effectively once alternative business structures (ABSs) come into being, Kerry Underwood, senior partner at Hertfordshire firm Underwoods, has warned.

Speaking at a legal process outsourcing (LPO) event hosted by the South African High Commission in London last week, Underwood said major companies were ‘no longer prepared to pay the rates even junior lawyers are charging in London, New York and Washington. Lawyers here will be cut out of the loop’.

He added: ‘Roughly, you can get work done in South Africa for half the price here… firms who bury their heads in the sand will go because the work will go.

‘The Legal Services Act passed last year introduces ABSs… if you don’t think supermarkets, insurance companies and banks will practise law, I am sorry they will. If you think they would think twice about off-shoring legal work, you are wrong.’

Underwood said high-volume, routine and non-contentious legal services would be most easily outsourced.

However, Seamus Smyth, partner at London firm Carter Lemon Camerons, told delegates that, while outsourcing purely mechanical processes would be relatively safe, outsourcing professional legal services to lawyers not qualified in English law would be problematic.

He said: ‘I am positive about LPO at a mechanical level but much less so at a professional level. I think it carries a high level of risk with it.’

Graham Chrystie, consultant at City firm Speechly Bircham, said: ‘I totally agree with the concept but… you have to trust and know the chap who is providing the outsourcing service. Clients will want to know you had vetted them.’