Research from the Legal Services Board (LSB) points to the strong potential of alternative business structures (ABSs) to make a huge difference in the legal services market. According to the LSB, ABSs are more productive, better at dealing with complaints about service and more innovative than traditional law firms.
ABS organisations now enjoy a market share of 5% and are represented in all segments of the market, suggesting that they are beginning to have an impact in certain industry niches, the LSB said.
In 2012/13, ABSs were found to have the highest productivity among all types of firm, enjoying £113,000 in turnover per fee-earner in the period compared with £105,000 at legal disciplinary practices and £84,000 at other law firms.
ABSs also presented more frequent reports of new innovation when compared with other providers. The LSB's review of innovations over the last three years shows that some 13% of ABSs have adopted an innovation that is not associated with their organisational structure against just 1% of other providers, mainly larger firms serving businesses.
The LSB further notes that ABSs have excelled in handling complaints about service from clients, resolving 11 complaints in-house for each one referred to the Legal Ombudsman. In the case of legal disciplinary practices the number was five, while for other solicitors' firms the figure was four.
ABSs are most prominent in the injury market, where they have a 20% market share divided equally between new entrants and existing firms that have chosen to become ABSs.
Despite the increasing number of ABSs entering the legal services market, organisations still encounter obstacles to securing innovation and growth. According to research among ABS organisations regulated both by the SRA and the Council for Licensed Conveyancers, regulation and the traditional partnership model are still the main barriers to success, as mentioned by 43% and 41% of respondents, respectively. Uncertainty over future regulation and access to capital were also among the issues that concern ABS organisations, the LSB noted.
The full research report from the LSB is due to be published next month.