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Legal Services Board publishes further research on prices and small businesses legal needs

In February the Legal Services Board (LSB) published its third research report focusing on the legal needs of small businesses.

The number of small firms in the UK economy continues to increase. These firms have a greater need for external business support than larger businesses, in part due to their limited internal resources and experience.

One of the objectives of the research was to track how an individual or business responds when faced with a problem that can be resolved using legal processes. We have now undertaken further detailed examination of the research data which sheds new light on this.

Controlling for all other factors, transparency from legal services providers on price will result in small businesses in England and Wales seeking more legal advice. This new analysis found that small businesses that believe that ‘legal services providers are transparent about their costs’ are twice as likely to seek advice when facing legal issues.

Neil Buckley, Chief Executive of the Legal Services Board said:

“In 2016 there were an estimated 5.5 million private sector firms in the UK, an increase of over 250,000 since 2014. Our research shows that around a third of small businesses encountered a legal problem during the period the research surveyed.

Over time there has been a significant increase in the proportion of small businesses doing nothing when experiencing a problem (10%), while the proportions handling problems alone (50%) or using an advisor (24%) have changed little between 2013 and 2017.

Price is an issue with only 11% of small businesses agreeing that lawyers provide a cost effective means to resolve legal issues (this is down from 14% in 2015). Our analysis shows that there is a strong relationship between perceptions of price transparency and likelihood of seeking legal advice – which supports the Competition and Markets Authority’’’s recommendations on transparency.

Based on our model, greater price transparency could lead to a substantial increase in the number of small firms seeking advice from legal services providers.

In addition, our research shows that the way in which small businesses characterise their problems also influences whether and how they seek legal advice. Our work suggests that the market for legal advice would grow if better information on small business rights and the range of services on offer was available. This underlines the value of current work by the frontline regulators to enhance the Legal Choices website.”

Notes

  1. An infographic summarising the results can be found here and a technical report explaining the model used can be found here.
  2. The 2017 survey was undertaken by YouGov. The analysis was undertaken by BMG Research. The full report can be accessed here.
  3. Previous rounds of the research can be found (2015) here and (2013) here.
  4. The Competition and Markets Authority recommendations on transparency can be found here.
  5. The Act created the LSB as a new regulator with responsibility for overseeing the regulation of legal services in England and Wales.The new regulatory regime became active on 1 January 2010.
  6. The LSB oversees ten approved regulators, which in turn regulate individual legal practitioners. The approved regulators, designated under Part 1 of Schedule 4 of the 2007 Act, are the Law Society, the Bar Council, the Master of the Faculties, the Chartered Institute of Legal Executives, the Council for Licensed Conveyancers, the Chartered Institute of Patent Attorneys, the Chartered Institute of Trade Mark Attorneys, the Association of Costs Lawyers, the Institute of Chartered Accountants in England and Wales and the Association of Chartered Certified Accountants.In addition, the Institute of Chartered Accountants of Scotland is an approved regulator for probate activities only but does not currently authorise anyone to offer this service.
  7. As at 1 April 2017, the legal profession in England and Wales comprised 148,690 solicitors, 15,281 barristers, 6,809 chartered legal executives and 5,958 other individuals operating in other areas of the legal profession such as conveyancing. The UK legal sector turnover was £31 billion per annum (2016) which is up 19% in cash terms since 2012. For more information see here.