Market Round Up: March 2025
It is not really news that the number of personal injury (PI) law firms has fallen in recent years, especially due to the pandemic and whiplash reforms, but new research from the Association of Personal Injury Lawyers (APIL) has shown just how much: the number of law firms which generated 50% or more of their turnover from PI fell from 723 in 2018/19 to 467 in 2023/24, a drop of 35%.
There was also a 17% decline between 2019 and 2023 in the number of barristers who said PI was their main area of practice, to around 1,200, while the number of CILEX members working in PI fell by 40% over the last five years, to just over 2,300.
Most law firms remain relatively small in size, with 57% having five or fewer fee-earners and just 7% more than 50, but size increasingly matters. Figures from the Compensation Recovery Unit for the year to 31 March 2024 revealed that 20 firms between them represented the claimant in 53% of the 322,922 claims it registered, a figure that has been slowly increasing over recent years.
Similarly in clinical negligence, when measured on the amount of claimant legal costs paid by NHS Resolution, the top 20 firms had more than half of the market for the first time (51%). The top 10 firms had a 40% share.
The APIL report said that, with claims volumes remaining at depressed levels and fixed fees weakening margins, overall market growth “is expected to be limited over the coming years”, meaning that more merger and acquisition activity was likely to support growth for some firms.
“This will drive further consolidation and lead to an increasing market presence for existing market leaders. An increasingly consolidated market may attract further external investment into the market, including from private equity, which will in turn drive further consolidation.”
Indeed, separate research published by Acquira Professional Services showed that private equity has invested nearly £1.2bn in legal services over the past five years, with a record £534m last year alone.
APIL said some smaller specialist firms that focused on the limited number of high-value claims would also continue to be successful, but only if they have “the necessary reputation, partnerships and expertise”. It added that there were “some debt issues” in the sector: “Ultimately, there is a risk that this results in a debt bubble which bursts. This could pose a risk to firms with high levels of borrowing.”
IRN Legal Reports helped APIL compile the report and separately it has found that the value of the medico-legal market grew by 4% in 2024, double the growth rate of the previous year, to £674m.
Its annual review of the medico-legal and insurance services market noted how a sector traditionally “populated by many small companies” was also showing signs of consolidation, with larger groups increasing their share of the market, often by acquisition.
The move to more integrated businesses was likely to continue as well, whether it was integration between law firms and medico-legal operators, accident management and medico-legal companies, or medico-legal operators and companies providing treatment and rehabilitation services.
The number of providers registered on MedCo had been declining since its launch, going down from 47 in 2021 to 37 last year and 35 this. The number of individual medical experts registered on MedCo dropped only marginally from last year to 508, but that was 75 fewer than in 2022.
Of course, plenty of firms have been pivoting away from PI into other areas of consumer claims, but it comes with risks. One solicitor was recently fined by the Solicitors Disciplinary Tribunal for letting her firm – which also had a personal injury department – run mortgage mis-selling claims when she had “no experience or expertise” and made multiple errors as a result.
Clients were not told of the various options open to them and were instead only directed towards litigation, while the firm did not inform its after-the-event insurers about adverse counsel’s opinions, or seek their approval before issuing proceedings, as it was required to do. The solicitor admitted that she had acted recklessly and without integrity.
Elsewhere, the Financial Conduct Authority (FCA) has told claims management companies (CMCs) that it continues to be concerned by poor service standards, inappropriate sourcing of customers and misleading advertising.
In a letter to all regulated CMCs, she said that, since the FCA took over in 2019, there has been a steady decrease in the number of CMCs, with lead generators now accounting for more than half of the industry.
Over the next couple of years, it will be looking closely at CMCs that submit high volumes of complaints to the Financial Ombudsman Service but have low rates of success, while in personal injury “we will review the marketing literature and due diligence conducted around the sourcing of personal injury leads and will look at how firms are ensuring and monitoring good outcomes under the Consumer Duty”.
Finally, leading injury practice Fletchers has had its say on an issue that is set to affect many law firms around the country – the possibility that government funding for Level 7 apprenticeships will be scrapped.
Last autumn, ministers announced a new growth and skills levy to replace the existing apprenticeship levy, introducing new foundation apprenticeships and shorter apprenticeships too. They said employers would be asked to “rebalance their funding” for apprenticeships in favour of younger apprentices, and to fund more level 7 apprenticeships – equivalent to a master’s degree “and often accessed by older or already well-qualified employees” – outside of the levy.
Fletchers has joined the chorus of opposition, writing to MPs and ministers to urge the government to reconsider the plans. Lorna Bailey, its head of learning and development, said it was “extraordinary” that a government committed to growth and social mobility planned to “wipe out one of the most successful social mobility programmes we’ve ever had”.
Fletchers has taken on 104 apprentices since the levy was introduced in 2017 and used £645,000 from the levy to fund the programme, covering non-graduate and graduate solicitor apprenticeships, CILEX lawyer apprenticeships, and other legal and non-legal apprenticeships.
Ms Bailey predicted that the changes would make training contracts “more competitive and only accessible for those who can afford towards £50,000 in course fees”. She warned that the move would be “a massive setback for young, aspiring lawyers”, which would “re-institute a class ceiling on the ambitions of young people”.
Neil Rose is the Editor of Legal Futures
