Martin Partington: Spotlight on the Justice System

Business problems decline but are costly

• The number of legal problems faced by small firms reduced significantly over the last two years reflecting better trading conditions. The most common problems related to trading, employment and taxation. Other businesses were the main source of problems.
• Half of firms reporting a legal issue said it had a negative impact; one-quarter of them reported loss of income and one-fifth reported health related problems. Total annual losses to small firms due to legal problems is estimated at £9.79bn.
• Larger small businesses, and businesses with BME and disabled business owners-managers, were most likely to experience problems.

Limited engagement with legal service providers

• The large majority of firms had little contact with legal advisers. Less than one in 10 either employed in-house lawyers or had a retainer with an external provider. Over half of firms experiencing a problem tried to resolve it  by themselves. When advice was sought, accountants were consulted more often than lawyers.
• There was a marked decline in the use of external support providers between 2013 and 2015, reflecting the decline in problems. Use of solicitors in the previous 12 months fell from almost 20% to almost 10%; and accountants from over 60% to just over 49%.

Mixed attitudes to legal service providers

• Only 13% of firms viewed lawyers as cost effective – little improved since the LSB’s 2013 survey. Microenterprises were the least likely to view lawyers as affordable.
• Almost 50% of respondents strongly agreed or agreed with the statement that they use legal service providers as a last resort to solve business problems compared with 12% who disagreed strongly or disagreed.
•  Satisfaction that law and regulation provide a fair trading environment increased from 30% in 2013 to 45% in 2015 – improving economic conditions as well as improvements in the regulatory environment may explain this change.

This report was one of the items used by the Competition and Markets Authority in deciding to undertake a Market Review of legal services.

To read the research report in full go to https://research.legalservicesboard.org.uk/wp-content/media/PUBLISH-The-legal-needs-of-small-businesses-19-October-2015.pdf