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Research shows SMEs’ legal needs remain unmet by legal services providers

The Legal Services Board (LSB) today publishes a report focusing on the legal needs of small businessesand looks at how their views have changed – and the legal services market has responded – since similar research was conducted in 2013.

The significance and growing importance of small firms to the economy in terms of employment, output and innovation is widely acknowledged: 99 percent of 5.2 million private sector enterprises in the UK in 2014 employed less than 50 people.

Closely linked to the success of small firms is the ease with which they can access the support and advice they need to thrive, particularly on matters connected with the law and dispute resolution.

The ability of the legal sector to meet that demand and the likelihood of small businesses seeking legal advice – and their experience when they do – are important to understand.

Key findings from today’s report include:

Legal problems faced by small businesses appear to have declined in incidence but remain costly

  • The number of legal problems reported to be faced by small businesses reduced significantly over the last two years reflecting better trading conditions
  • Total annual losses to small businesses due to legal problems is estimated at £9.79 billion
  • One in five owners who reported legal problems said these led to health problems

Engagement with legal service providers is limited

    • The large majority of small businesses had little contact with legal advisers and use of solicitors in the previous 12 months is markedly down when compared to 2013
    • Fewer than one in 10 firms employed in-house lawyers or had a retainer with an external provider
    • When advice was sought, accountants were consulted more often than lawyers

Attitudes to legal service providers are mixed

Attitudes to legal service providers are mixed

  • Only 13 percent of small businesses viewed lawyers as cost effective – little improved since the LSB’s 2013 survey
  • Almost 50 percent 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 percent who disagreed strongly or disagreed.

Legal Services Board Chairman, Sir Michael Pitt, said:

“Access to good quality and affordable legal services helps small businesses to start up and grow.

This research – the largest ever survey of its kind –provides further worrying evidence that their legal needs are not being satisfactorily met. These findings suggest that small business access to and use of legal services has improved little since we first looked at the issue two years ago.

 

But this also presents an opportunity. There continues to be a huge section of the business community whose legal needs are not being catered for. This is an opening which the legal sector should be addressing!

 

Legal problems can have serious negative financial and health consequences for small businesses and their owners. Many of these issues can be avoided by accessing legal help at the right time. The legal sector needs to look at what it can do to fill this advice gap. In doing so it will create the customers of the future.”

Mike Cherry, Policy Director for Federation of Small Business (FSB) said:

” Unnecessary legal action is both costly and time consuming and for some businesses highly risky. It’s therefore important for small companies to have access to appropriate and affordable legal services and advice.

The results of today’s report suggest some worrying trends around value for money. However, we know from the FSB’s own legal advice line for members that getting the right advice at the right time can save small firms money in the long run.

Given so many small business could benefit from making more use of legal service, we hope today’s report will encourage service providers to explore and develop their offering to small businesses – focusing on how they can deliver real value for money.”

The LSB will be hosting a panel discussion on this research on 9 November. Representatives of theDepartment of Business, Innovation and Skills, the Federation of Small Business and the Solicitors Regulation Authority will be present. For more information and how to register please see notes to editor point 5.

ENDS

For further information, please contact the LSB’s Communications Manager, Vincent McGovern (020 7271 0068).

Notes for editors:

  1. This is the largest ever survey of small firms’ (businesses with up to 50 employees) interactions with the legal sector.  It draws on 10,528 online responses, including 1,463 who were also interviewed in 2013.
  2. The 2015 legal needs of small businesses report can be found here.
  3. The 2013 report legal advice for small businesses can be found here.
  4. Three separate have been mined from this research.  They specifically focus on the key findings and implications for:
    –      legal service regulators
    –      legal service policy makers, and
    –      legal services providers.
  5. The LSB is holding a briefing and discussion event on Monday 9 November at the Department for Business, Innovation and Skills (BIS) to discuss the findings of this report and an earlier report jointly published by the LSB and the Solicitors Regulation Authority (SRA) in July on innovation in the legal services sector.The findings of both reports will be presented by the authors following which a panel discussion and Q&A session featuring representatives from the LSB, SRA, BIS and the Federation of Small Business will be held.

    This event is free to attend and should be of interest to a wide variety of stakeholders such as business representative groups, regulators, consumer organisations, academics, legal service providers and policy makers in central government and any other interested parties.

    For further information please get in touch with the LSB here.  To attend this event please register for freehere.

  6. The Legal Services Act 2007 (the Act) created the Legal Services Board(LSB) as a new regulator with responsibility for overseeing the regulation of legal services in England and Wales. The new regulatory regime became active on 1 January 2010.
  7. The LSB oversees nine approved regulators, which in turn regulate individual legal practitioners. The approved regulators, designated under Part 1 of Schedule 4 of the Act, are the Law Society, the Bar Counil, the Master of the Faculties, the Chartered Institute of Legal Executives, the Council for Licensed Conveyancers, the Chartered Institute of Patent Attorneys, the Institute of Trade Mark Attorneys, the Association of Costs Lawyers and the Institute of Chartered Accountants in England and Wales.In addition, the Institute of Chartered Accountants of Scotland and the Association of Chartered Certified Accountants are listed as approved regulators in relation only to reserved probate activities.
  8. As at 1 April 2015, the legal profession comprised 142,109 solicitors, close to 500 alternative business structures, 15,237 barristers, 7,848 chartered legal executives and 5,678 other individuals operating in other areas of the legal profession such as conveyancing. The sector is valued at £29.2 billion per annum (total turnover in 2013).
 
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