There is no sector safe from the enormous changes and upheavals facing us in terms of Brexit. The latest Law Society report states that Brexit “is likely to have a significant negative effect on the legal sector in the medium and longer term. This is largely due to the knock-on impact of Brexit on the wider economy as demand for legal services is mainly a derived demand”.
Law Firms also face increasing competition in the form of alternative legal services providers (ALSPs), who, according to the Thomson Reuters 2017 Alternative Legal Service Study, ASLP is an $8.4 billion industry worldwide – and that figure doesn’t include companies that make legal technology to carry out legal tasks. This is expected to mushroom to £55 billion by 2025.
In August 2018, Big Four giant Ernst & Young (EY) announced it would be acquiring Riverview, a UK-based ALSP. The move is yet another step in the Big Four’s aggressive push into the legal sector, especially around technology led services.
These market pressures mean that managing partners and CEOs of Law Firms need to be more entrepreneurial than ever to protect their existing revenue and move into new markets. Unfortunately, the handbrake to most innovative ideas comes in the form of access to cold, hard cash.
This is where Law Firm funding provides the ideal solution.
One good example is in the acquisition of Road Traffic Accident (RTA) cases. As mentioned in Part 1 of this series , the Civil Liability Bill 2017-19 (the Bill) which requires that any RTA claim worth less than £5,000 be dealt with by the Small Claims Court (and in doing so dramatically reducing the costs that can be claimed on such cases, meaning lawyers are unable to take them on), have been delayed until 2020.
Most Law Firms who will be affected by the so-called Whiplash Reforms have long put strategies in place to deal with the loss of revenue, including moving into other areas of law or putting their focus on growing less volatile practice areas.
But given the delays in the Bill, an opportunity has arisen for Law Firms to continue to grow other areas and capitalise on their RTA claim expertise by acquiring as many cases as possible before the reforms come into force.
Traditionally Law Firms were self-financed and relied on slow, organic growth. However, with competition now increasing, the ability to quickly acquire a raft of cases from a case management company is imperative. Especially if it is known that the opportunity to run such claims is about to disappear. If ever there was a time to ‘make hay while the sun shines’ that time is now when it comes to RTA claims.
Law Firm funders solve the problem of cash flow, for a Law Firm’s clients, but for the firm itself. Being able to access a percentage of case funding, interest-free for a period of time, allows a practice to acquire a quantity of cases it would not otherwise have been able to fund.
Debt as a necessary part of growing a business
As ambitious Law Firms move from a traditional partnership structure to an entrepreneurial, corporate style model, to compete not only with ALSPs but to mitigate the ramifications of Brexit, relying on structured debt and external investment will become commonplace.
External funding provides a solution, not only to the challenges facing the legal profession, but the opportunities as well. Along with the increased life-expectancy of profitable RTA claims, the legal sector is currently buoyant thanks to Brexit-related work and an increase in work from international clients taking advantage of the depreciation of the pound. As Law Firms begin to run along more corporate lines, with CEOs and Boards working to clearly defined and structure growth plans, the flexibility that access to funding provides will give smart practices the fuel they need to thrive, regardless of the economic climate.
RTA claims is merely one example of the opportunities Law Firm funding can open up. There is little doubt that the rapid change we are experiencing will lead to more competition and greater chances for growth.
To find out more about litigation funding for PI claims, please contact us on 0333 222 5731.
BMS Funding works with the legal profession and businesses to provide funding solutions for most areas of the legal market .