“Number of law firms dips to new low” What does it mean?

4 Nov 2013

An article in the Law Gazette on 31st October talked about an all time low in the number of law firms and inferred this shows the profession is in terminal decline.

Bunkum.

The future is brighter than ever.

The economy is picking up, the market is open to proper competition and will grow. In the short term the dead hands of the SRA, the appointed regulator and the insurance industry, the I appointed regulator are acting to dampen growth in the market but firms will find ways to shake them off and grow. Market forces will prevail.

Look at the number of practising solicitors.

number-of-practising-solicitors

The number of firms did fall in September 2013. It falls in September and generally October every year because of firms which choose not to renew their PI cover and leave the market. This year the absence of the ARP will cause the number to fall again by another 150 or so.

That will leave around 10,500 firms.

While that is lower than the number has been bear in mind that some of the firms disappearing were not proper businesses anyway. Also the number of firms will rise again because there are more firms opening than closing throughout the year except in September/October.

law-firms-opening-vs-closing

There is a reduction in the percentage of unincorporated sole practitioners and an increase in LLP and limited company trading vehicles, but that is common sense with those setting up businesses now choosing vehicles which give some limitation of liability.

The good news is that there are a lot of start ups and it is still the case that the vast majority of law firms are small and medium sized businesses.

The future is bright for those willing to see it that way.