As the legal industry comes to terms with the so-called "Tesco Law", firms of solicitors are divided about the right approach to take
28 Nov, 2012
As the legal industry comes to terms with the so-called “Tesco Law”, firms of solicitors are divided about the right approach to take.
2012 has seen law firms across the UK coming to terms with a change in the law governing the way they are owned. It remains to be seen the full impact of the changes, but one thing is for sure; legal firms are having to address the way they do business, sharpening their approach to the realities of the commercial environment.
Last year saw the introduction of Alternative Business Structures (ABSs), which have made it possible for people who aren’t partners in firms to own and run firms as commercial operations and for law firms to receive new forms of investment, such as from stock market floatation and private equity funding.
Popularly known as “The Tesco Law”, the Legal Services Act potentially paves the way for a situation where legal services are available from supermarkets, just as financial and other services currently are. One of the first companies to take the government up on an ABS was not in fact Tesco but The Co-Operative, who have rapidly been expanding their legal services offering, which will allow them to offer face to face legal advice over the counter at their network of banks.
The law is seen as both a significant opportunity and a significant threat. The fear amongst many firms is that the introduction of greater competition will result in a diminishing of standards across the board as companies fall over each other to secure a commercial advantage. While some firms have decided to adapt to the changes by significantly altering the way they do business, others have stuck to their same-old strategies and made few if any changes to their operations, while yet another group have subtly adapted to the realities of the new situation and been able to make significant gains. Only time will tell which strategy proves to be the most effective.
For Freeth Cartwright, their response to these changes is simple, but no less effective. They are providing greater depth to their interactions with their clients, ensuring that they are on hand to provide the same comprehensive level of legal advice when clients need it most. With national coverage, their geographical coverage extends throughout many different cities, ensuring that they can administer personally and effectively to their regional and national client base.
Peter Gavin (pictured), Managing Partner at Freeth Cartwright in Stoke, commented: “ABS’s have definitely changed the landscape. Law firms have felt protected and isolated from the commercial arena for a long time, but that is all changing. Legal firms are addressing their approach and seeing themselves more as businesses, with some firms defining their territory as “stack it high and sell it cheap” and others choosing to remain aloof from the fray and continue with a traditional approach. At Freeth Cartwright, we are proud to be taking the middle ground. We are certainly looking at the way we do marketing and we are consciously promoting the value of our services to clients, but we have made a conscious decision not to alter the service we offer and the standard of expertise we employ. We have found that in uncertain times, our clients value certainty, security and assurance when it really matters. That’s one reason why we have begun working on fixed fees and retainers People come to us because they know what they are getting- the very best legal advice. Our commitment to delivering that is at the heart of what we do.”
It’s a strategy that is certainly paying dividends, with clients responding to the security and dependability offered by the company. This year has seen Freeth Cartwright continue to make significant progress as one of the country’s fastest growing firms, with offices in all the major business centres in the country, including London, Manchester, Birmingham, Nottingham and Sheffield. Their most recent acquisition is the highly respected Oxfordshire firm Henmans, which brings the total strength of the group to 629 staff, 125 partners, and anticipated total revenue of approximately £50m.
The benefits of a partnership are not simply the retention of control by specialist experts in their field, but have wider implications too, including in the way that firms are able to attract new talent and in the career development of lawyers in general. When the ownership of companies is shared between external investors, firms of solicitors will be in danger of losing the traditional incentive for early-career solicitors of one day achieving partner status within a firm, and the share of the profits that goes with this. There are fears that the legal profession will become less attractive to graduates and young people as a career.
The full picture surrounding the introduction of ABS’s has not yet become clear. However, the industry is certainly nervous about what the future holds. If there is fear, though, it is tempered in many firms by optimism and excitement about the opportunities that increased competition will bring for firms to innovate, increase service levels and market effectively, all of which should have a positive impact on the profitability of the legal industry.