Solicitors are predicting a radical change to the future of law firm financing if the Legal Services Bill permits outside investment, research revealed last week.

A survey by accountancy firm Smith & Williamson showed that some 54% of solicitors questioned thought professional firms would seek funding through the private equity market in the future, compared to 37% who made the same prediction last year.


More than half anticipated that firms would list on the Alternative Investment Market or London Stock Exchange - up from 29% in 2005.


The survey of 105 professional services firms, of which 88 were law firms, also showed that 74% of respondents expected the professions to join forces in some areas, compared to 54% last year.


In a separate survey released this week by accountants PricewaterhouseCoopers, the vast majority of top 25 firms welcomed the proposal to allow external investment in law firms - although many of the other firms in the top 100 did not - and 85% said they expected it to increase the availability of alternative sources of finance.


The survey also found increasing support for multi-disciplinary practices, along with widespread fears that the Bill will increase the cost of regulation. Only 20% of the top 25 firms - and none of the top ten - expected the Bill to be of benefit to their clients.


Simon Mabey, chairman of Smith & Williamson's professional practices group, said: 'If law firms were allowed to list on financial markets, it would be peculiar if some did not. There are listed surveyors, accountants, architects and management consultants. Every other sector has gone in that direction.


'There will be firms who see it as an opportunity to grow. If you list, it becomes far easier to build your business through acquisition. There is a pattern where listed accountants then acquire a whole series of practices. If a magic circle law firm listed, the capital value would be very large indeed... once a firm does it, all the others sit up and take notice, and may want to follow.'


Firms were also more certain of a positive business outlook over the next 12 months than they were last year. Almost a third were very confident, according to the survey, compared to 12% in 2005. Some 83% said they were reasonably confident, while only 1% were not very confident.


Firms' priorities have also changed from last year. While retaining key partners has been the main concern for the past two years, firms now cite meeting partners' profit expectations as their second biggest issue, followed by improving the size and quality of clients and achieving growth.


Speaking at the Smith & Williamson Legal Services Bill seminar where the research was revealed, former Beachcroft senior partner Lord Hunt of Wirral - who chaired the parliamentary committee that scrutinised the draft Bill - said it contained 'very little' that would help large international clients.


He said: 'The government has the consumer [in mind]. Consumer bodies like Which? have enormous influence. But the consumer does not mean the large companies and clients that have made the [UK] legal profession the centre of excellence that it is, by their demands on quality'.