State of the Market: 'Substantial' Changes to Business Models for Firms

More than a third of law firms have had to “substantially” change their business model to cope with the fixed costs rollout, our ‘State of the Market’ survey found.

As of October last year, fixed recoverable costs now apply to the majority of civil cases worth up to £100,000, but the impact on firms has been significant.

Of the 113 we spoke to, fewer than half (43%) thought they would be able to adapt, while 34% said they would have to substantially change how they operate in order to survive.

Now in its seventh year, our annual survey looks at the challenges affecting the personal injury and clinical negligence sector. Unsurprisingly, the hottest topic was reforms.

Over half (53%) of firms that handled low-value RTA claims have ditched them since the whiplash reforms took effect, complaining that they are no longer financially viable.

Those still doing the work have observed an increase in non-whiplash injuries and other non-injury elements such as credit hire.

A third of firms have diversified, with many looking beyond personal injury and into consumer claim areas such as data breach, energy bills, financial mis selling and housing disrepair.

Clinical negligence was also highlighted as a growth area, with almost half (44%) of firms reporting an increase in case numbers. Encouragingly, three-quarters believed that NHS Resolution was making genuine efforts to improve and promote settlements at an earlier stage. This view is shared by Paul Whiteing, CEO of AvMA and our featured ‘industry expert’ this quarter, who says NHSR has been receptive to listening to the charity’s concerns and is currently working with AvMA and the Society of Clinical Injury Lawyers (SCIL) on processes to improve the flow of information for patients.

The proposed introduction of fixed costs for claims worth up to £25,000 is likely to impact many.

However, despite the continued upheaval across both clinical negligence and personal injury, 43% of firms reported higher turnover and 52% higher profits.

This may, at least in part, be attributed to a clear willingness to adapt to change. More than 80% of firms have upgraded their services since the Covid pandemic, with many now meeting the growing demand for live chat and appointments online.

Qamar Anwar, managing director of First4Lawyers, said:

“The personal injury sector has changed immeasurably in recent years, but what is reassuring is the incredible resilience shown by the majority of law firms and their determination to survive and thrive, even in the face of so much upheaval and uncertainty.

“With further costs reform to clinical negligence claims on the horizon, it is positive to note that most firms have seen an improvement in the way the NHS handles litigation.

“Clinical negligence is a complex area and lawyers do an enormous amount of due diligence to filter out spurious claims.

“Resolving rather than resisting those cases where liability is clear will not only save claimants the time and upset of needless negotiations, but it will also help keep costs down so is surely a win-win for all involved.”