One of the country’s biggest claims management companies maintained profits during the first year after the Jackson civil reforms, accounts have revealed.
According to documents filed with Companies House, First4Lawyers posted pre-tax profits of £2.63m in the year ending April 2014. This was marginally up on the 2012/13 figure of £2.61m.
The increase in profit came despite civil litigation reforms brought in by the Legal Aid, Sentencing and Punishment of Offenders Act in April 2013. The restrictions are expected to have cut revenue for the law firm clients of CMCs, reducing sums available to spend on marketing.
Turnover at First4Lawyers did fall fractionally during the year, from £13.35m to £13.32m.
Administrative expenses also rose, from less than £900,000 to more than £1.2m. Meanwhile staff costs leapt from £506,000 to around £726,000, with 13 employees listed as working for the company.
The highest paid director saw their salary rise from £75,000 in 2013 to £112,500 this year.
First4Lawyers has grown to become one of the biggest firms of its kind since it was created in 2008 by law graduate Qamar Anwar.
In the last year it has focused marketing operations on the clinical negligence market, formed a partnership with a set of chambers and opened its panel to larger law firms.
Meanwhile, the company has written to the Ministry of Justice to state its opposition to the way fees for CMCs are calculated in 2015/16.
The claims management regulator (CMR), run from the MoJ, says 1,000 CMCs left the sector in 2013/14, with a direct impact on total fee income and a potential extra burden on companies still in business.
Plans published in a consultation document include lowering the threshold where a firm starts paying a percentage of turnover for their fees from £142,000 to £88,889. Changes would also see the existing £55,000 cap abolished for annual registration fees and replaced with one of £100,000.
The fees based on percentage of turnover will increase, with the initial application fee rising from £1,400 to £2,000.
First4Lawyers says it expects to see a real-terms fees increase of between 81% and 87%. This is in addition to an extra £25,000 required to pay for the Legal Ombudsman to start handling complaints about CMCs next month.
The company’s response to the consultation said that in the space of 12 months First4Lawyers contributions to the CMR and LeO will have increased by over 132%.
‘The differences in the percentage fees proposed by the CRM represent annual increases of between 80% and 188%,’ added the response.
‘What justification is there in implementing an inflation-busting price rise? These rises are far greater than those faced by smaller businesses and should therefore be far more proportionally balanced.’
The response added that regulatory changes mean that solicitors are pushing for tighter cost controls and the sector is also facing increased marketing costs.