Reforming regulation to bring innovators to the market

David Webster recently put forward some interesting views on trends in regulation, citing me as saying that alternative business structures (ABSs) have not worked (“Solicitor and the Bar regulation grow ever closer” 28 August).

Perhaps I could set out the context for my remarks. My point was twofold – firstly that we took some time to get to grips with what is complex and restrictive legislation and rules. Secondly, we have not seen the growth of multidisciplinary practices (MDPs) that we all hoped for.

Until recently, many ABSs’ experience of authorisation was that it was lengthy and unnecessarily cumbersome. That was to some extend a function of the legislation but there is no doubt that we could have been smarter in its application. Happily, that is now the case and we are turning around applications quickly, with good feedback. MoJ proposals for changes in the process will help further and make ABSs an even more attractive proposition.

This is all good news. ABSs bring fresh capital and thinking into the market, and are good for competition and improving choice. Research shows that they are more innovative than traditional firms, being up to 15 per cent more likely to introduce a new legal service.

However, we have not seen the growth in MDP ABSs that is needed. MDPs offer consumers the opportunity to access a range of related services – such as accountancy, estate agency or even undertaking – from a single business. There are huge opportunities for lawyers to, for example, sell into both the accountancy and legal markets. This can play a part in tackling the big problem of unmet legal need.

Only one in ten small businesses use a solicitor or barrister when they have a legal problem – yet almost half use accountants for advice. To level the playing field, we have removed the Separate Business Rule that David alludes to, so traditional law firms can also offer ‘one stop’ shops, expanding their offer and competing with MDP ABSs.

The Bar Standards Board is at a different stage in the journey when it comes to ABSs, but I welcome the contribution that BSB regulated ABSs will make to the legal market.

ABSs are not a panacea – they are one part of our much larger programme of reform, As a regulator whose primary focus has to be the public interest, we want to improve access to affordable legal services for consumers by freeing up firms to compete and grow.

Our focus on high professional standards set independently in the public interest, with targeted consumer protections, is key to our drive to cut bureaucracy and modernise the market. Consumer protection should not be confused with protectionism. We want to give the firms we regulate – many of which employ barristers – more flexibility. We want them to have to get on with their own business, and focus less on the business of ticking regulatory boxes. That is why we are in the process of creating a shorter, sharper and clearer Handbook that focuses less on rules and more on principles.

And of course all this is against the background of wider uncertainty, not least as Britain exits the European Union. I am familiar with the arguments that reform is too risky and that the old ways are the best ways, but I believe maintaining the current status quo is not an option. Now is the right time to carry out reforms that will make sure our legal services market is as open and competitive as possible. That will not only benefit the public through making legal services more accessible and affordable, but will make a positive contribution to a modern post Brexit economy.

Paul Philip, SRA Chief Executive

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