Economic performance of the legal services market
3.4 On the face of it, the value and scale of the legal services market makes it an economic success story. The value of the sector has risen steeply since the 1980s and this has fuelled a massive expansion of the legal profession. While the overall trend has been upward, year on year growth peaked in the early 2000s. Turnover in the UK legal services sector[1] grew by 60% between 1995 and 2003, to a total of £19bn (Department of Constitutional Affairs, 2005); by 2010, despite downturns in performance, it had grown by another 35% to reach £25.6bn, or 1.48% of GVA (gross value added) (Law Society, 2012a). It is estimated that solicitors in England and Wales accounted for over £16bn of that total (LSB, 2013:1). As in other successful areas of the economy, however, this picture of steady growth has been interrupted by the recent recession. With evidence of widespread contraction in the demand for legal services (LSB, 2012), turnover has fallen in real terms across the sector as a whole between 2010 and 2012 (Law Society, 2012a). Looking towards 2020, the rate of recovery remains uncertain. The Law Society forecasts that after the dip of 2012, legal services will return to ‘modest’ economic growth in 2013, with longer term growth predicted to be over 4.2% from 2015 (Law Society, 2012a). The projections developed by Wilson (2012) for the LETR research similarly anticipate little economic growth in real terms before 2015 at the earliest. Such projections are, of course, grounded in part on historic performance, and may well underestimate the impact of critical changes to the regulation and funding of legal services, that will impact different parts of the legal services sector very differently.[2] These changes will be explored through this chapter.
[1] Note – these figures refer to the United Kingdom and not just England and Wales.
[2] Data from the recent Time of Change study thus demonstrate that recent performance has tended to vary substantially according to firm size and market segment. Medium sized and large firms were most likely to report increases in turnover, with single solicitor firms least likely to do so. Firms with 25% or more of their work in property or crime were most likely to report a decrease in turnover of 10% or more, whereas those concentrating on commercial and personal injury work had ‘fared best overall’ (Pleasance et al, 2012:52). Survey data based on a sample of 2,007 firms across England and Wales.