The number of solicitor firms has fallen by almost 800 in the past two years, new figures have revealed.
The SRA’s monthly snapshot of the legal profession revealed there are now 10,519 firms in total. That represented a monthly fall of 27 and the ninth time in the past 10 months the figure has dropped.
Over the longer term, a pattern emerges of gradual decline in solicitor firms: two years ago the SRA reported 11,304 firms in existence – 785 more than at the start of this month.
Just 30 firms closed in February – the most recent month that figures are available for – but over the course of the last year 1,094 firms have closed. Of these, 475 ceased to practise, while 388 changed their status, 180 merged or amalgamated and 51 had another reason for closing.
A leading accountancy firm has warned that firms must innovate and diversify if they want to avoid being forced to close.
Baker Tilly said recent reports had predicted just a quarter of the 200 mid-tier firms may survive in the short to medium term.
A briefing note says that in consumer law, the best personal injury firms have developed a range of services no longer restricted to claims-handling and management.
It noted that the more innovative firms and those which have greater appeal to external funders, including private equity providers, now have offerings which take in loss adjustment, physiotherapy and medical care.
‘These are the businesses that will continue to grow and attract further external funding and ultimately be sold to a larger business or perhaps even IPO in their own right,’ said the briefing.
To avoid being one of the firms to close, managers should not allow work in progress to build up.
Excessive drawings, weak financial management, poor communication and rushed-through mergers are further pitfalls to avoid.
The briefing note says surviving firms will have a ‘competitive edge’ and overcome the issues of an over-supply in the market.
‘If you are determined to be one of the winners, then with the financial strength of survival comes the opportunity to build your own business through acquisitions of those firms who will not survive.’