Could We See a Decline in Personal Injury Firms in the North?

Recently there have been a lot of articles in the legal press about new government legislation which could impact the amount of personal injury firms we see. At present, the mainstream media hasn’t really covered this, most like due to the lack of sympathy it would probably garner from the public – let’s be honest, solicitors, particularly in personal injury or claims management, aren’t well-liked! So they wouldn’t be so keen to report on something where it paints a solicitor’s firm in a sympathetic light!

However, this new ruling by the government could affect a lot of firm across the country and in the North West, with some already reportedly saying they may choose to close down. This relates to the way smaller, more local firms gain clients. So I think it is important to report on this and make people aware, as it could lead to more unemployment in the area!

The background

Typically in the personal injury and claims market, the way a smaller legal firm will obtain new clients, is actually through the use of so-called ‘client-farmers’. These bigger firms are the ones you see all over daytime TV. They don’t actually do the work themselves, but instead pass you to a smaller firm in your local area, for a referral fee of around £750 usually. That;s all about to change though, as the new government rules state that referrals in this manner will no longer be allowed. Instead, a smaller firm will have to do more to attract it’s own clients, which will mean an increase in marketing budgets. This is the main reason a lot of firms are weighing up the cost of whether it is worth continuing to stay open, or close the department down.

Loopholes?

We all know working in law, if there is a loop-hole, law firms will find them! The bigger firms have already started to drop hints that they may just buy some of the client-farmers, therefore having referrals coming from an internal department, rather than an external company. However this isn’t really an option for smaller firms. Smaller firms are however exploiting the use of local marketing firms and paying for leads, rather than referrals. The technical difference being that it is up to the firm themselves to turn the lead into a client, rather than having the client already booked and ready to refer.

One such personal injury firm doing this is based in Bolton, called www.personalinjurysolicitorsboltonarea.co.uk and ran by John Peterham. John started the small company as a lead generation business, and positions himself as providing a valuable service to clients by matching them to the right solicitor. When we emailed him to ask how close to the line of referral fees this is, he said “It is close, but are certain we are within the guidelines set out by the Government. Our operation is referral fee’s as we just ensure a lead is passed to the most relevant firm.One that is local, and has a good reputation. It is then up to the firm themselves to actually convert that lead into a customer, and it doesn’t always happen.”

Impact

The impact of this ruling is yet to bes een fully, but one think-tank estimates up to 180,000 solicitors could have their jobs put at risk. We would estimate based on that around 30,000 would be in the North-West – staggering numbers if true. We contacted law students at Liverpool Hope University, and one who wanted to remain anonymous told us:

“This ruling seems very unfair, and it is hard to see the logic behind it. Why bother? What does it matter where the referral or client comes from, as long as they get a good service and their case represented by a qualified legal firm? For me personally, it’s a worry. Personal Injury and accident claims management was one area I was keen on, but now I may have to switch my course modules to something else if it is uncertain any jobs will be there when I graduate”

The reason for the change is a bit unclear, with the government’s own website not even explaining the reasons behind the change, but instead just enforcing the new ruling – check it out here. What is clear though, is that jobs in the local area could be heavily impacted, just at a time when they seemed to be stabilising. This could mean a lot of talented graduates out of work once again, and surely another damaging blow for the Government and local councils.

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