Tesco Law
THE CLEMENTI REFORMS AND HOW LEGAL SERVICES ARE CHANGING
Inefficient!
Expensive!
Outdated!
If you heard these comments in a pub, you might be forgiven for thinking they were about an ‘F’ energy rated domestic property. In fact, these are just some of the concerns voiced by many people about the legal profession over the years. Surprising when you consider it is an industry worth well in excess of £19bn per year…
So, although with us for over 700 years, the Government recently took the decision that the legal profession needed overhauling, and started a long process leading to the present Legal Services Bill.
Key features of the Bill include modernising the legal market by permitting new entrants, and untangling the spaghetti of legal regulation to give consumers better protection.
The Process
Back in 2001, the Office of Fair Trading carried out a report entitled “Competition in Professions”, which led to a series of Government responses over the next couple of years. The upshot of the various consultations was a fairly scathing verdict on the regulatory framework of the legal profession, being described as “outdated, over-complex, insufficiently accountable or transparent”.
So enter Sir David Clementi, who, in 2004, embarked upon a mammoth review of legal services, with suggestions for reform. The result was a landmark report with a measured series of objectives to manage the de-regulation of the legal profession in England and Wales. The findings have been described as “thoughtful” and “intelligent”.
Interestingly, Government went further than the original recommendations, with the publication of a White Paper, “The Future of Legal Servces: Putting Consumers First”. From this, came the Legal Services Bill which is working its way through Parliament as you read this. Depending on Parliamentary time, come 2011 a new legal landscape will exist.
The Key Changes
Although the Bill is divided into 2 large complex volumes, with many densely informative sections, its effect on conveyancing is straightforward and dramatic.
Government wants to encourage brisk competition in the delivery of legal services through the use of market forces. Gone are the days of a file being billed on weight (!). How better to drive down price and increase efficiency than by allowing new entrants into the legal markets, which are not necessarily legal themselves. Conveyancing is likely to be most affected.
One part of the first volume of the Bill is titled “Alternate Business Structures”. This envisages unlimited external ownership of legal practices, when only one manager has to be a lawyer. What a change!
Already we are witnessing the dramatic effect on residential conveyancing processes by the likes of AA, RAC and TESCO with their highly streamlined business practices. Lord Falconer said “supermarkets, motoring organisations, banks and other companies” should be encouraged to own law firms. The Bill also contains other possible business structures to enable consumers to be best served.
Service delivery now needs to match consumer expectation, and the overhauling of law is seen by some to be long overdue.
If (and when) the Bill is enacted into law, it is easy to see that smaller firms may well cease to be profitable. Such firms may suffer from slower decision making, a lack of investment in technology and inability to diversify. If this is the case, conveyancing may well be dealt with by larger regional or national law firms with the resources and structures in place to react to the market. These firms may have enough leverage to continue to make money in an increasingly harder marketplace.
It is clear that the legal profession can learn from non-legal entrants who have a deep understanding of consumer needs. Such mixed business structures will promote entrepreneurship, business creativity and streamlining. Many legal firms are now seriously considering diversification, perhaps by providing non-legal services, such as financial advice. Even further, with ownership of a traditional legal firm by a non-legal entrant, the possibilities for service offering are very wide indeed.
In conclusion, the coming years will be ones of both excitement and nervousness. Following the substantial changes to conveyancing practice in recent times, it will be interesting to see if the legal profession adapts successfully to the new challenges. After all, its what many other sectors regularly do in order to survive.
Tuesday, 31 July 2007
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