Further deregulation of the legal sector is on the horizon.
The legal sector in the UK is currently finely balanced; the SRA Accounts Rules are undergoing unprecedented and radical change, the age profile of the sector is rising, there are mounting regulatory burdens and changing consumer needs are transforming the once rigid and inflexible business models that law firms had in place for many years. The legal sector is in a period of both challenging and exciting change, but even greater deregulation may be just around the corner.
Removing barriers to entry for ABSs
The government announced in December that there will be a consultation in the Spring to discuss deregulation of the legal sector, including plans to remove barriers to entry for Alternative Business Structures (ABSs) and ensure the legal regulators are independent from their representative legal bodies.
In the publication document announcing the proposals, the government said: “This will create a fairer, more balanced regulatory regime for England and Wales that encourages competition, making it easier for businesses such as supermarkets and estate agents among others, to offer legal services like conveyancing, probate and litigation.”
Removing barriers to entry and allowing ABSs – such as supermarkets and estate agents – to offer legal services in England and Wales will of course ensure greater choice and opportunity for consumers, but what does it mean for solicitors and legal professionals?
Catherine Dixon, Chief Executive of the Law Society, commented: “People who are the most qualified and trained (solicitors) are the most regulated, and people who may not have any legal qualifications or training are the least regulated. We think that regulatory rules which should set the minimum rules and necessary protection for clients have become confusingly mixed up with professional standards.”
Simon Bladen, Partner at Hawsons, commented: “The implications of such major deregulation of the legal sector would of course be significant and, to be honest, it would raise some very real concerns about the future. This will be an extremely important issue over the course of the next five to ten years.”
The legal sector was for many years a largely closed, self-regulated market, but that all changed under the Legal Services Act 2007. Since that reform some 400 ABSs have now entered the market – particularly (initially) in the personal injury field – and that number is likely to increase considerably if the new ABS legal services proposals go ahead.
So, where next for the legal sector?
Should deregulation of the legal sector be welcomed?
Simon added: “The legal sector is a highly qualified and highly regulated sector and protecting the prestigious reputation of a ‘solicitor’ is absolutely fundamental. If there is a true opportunity to make the current regulatory system simpler and more pragmatic then reforms should be welcomed, but they should certainly not lead to a dilution of professional standards.”
“The government and SRA must take a holistic approach to any deregulation of the legal sector and be careful to not invoke a consumeristic approach; making legal advice as inexpensive and as accessible as possible. That would bring more harm than good, to law firms and their clients.”
“We have to wait and see what the outcome of the consultation is later this year, but one thing is for sure: business as usual is not going to be an option for many if the ABS legal services proposals do go ahead.”
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