New York-headquartered Duff & Phelps made the bleak assessment in the face of proposed civil litigation funding reform and the on-going effects of the Legal Services Act.

Significant changes

Duff & Phelps partner Steven Muncaster stated: ‘The combination of the downturn and the significant changes in legislation has created a market in which we are seeing an intense period of merger and acquisition activity.’
‘Law firms here in the UK that had historically focused on the once lucrative market of personal injury claims are now facing an uphill battle with increasing competition, rising referral fees from claims management companies and more aggressive tactics from insurance companies. Margins are down, cash flow is becoming tight as the boom days appear to be over.’

Crowded marketplace

The firm also highlighted the introduction of Alternative Business Structures, which are ‘allowing an influx of new entrants into an already crowded marketplace’.
Mr Muncaster said: ‘Many legal practices fear this new wave of competition will bring commoditisation of many legal services and increased pressure on already depressed profit margins.’