In the largest ever survey of  ABS firms, the Legal Services Board found that they have so far failed to take advantage of external investment.  With 950 ABS licenses granted, only one in eight had used external finance, the rest preferring business profits, cash reserves, bank loans and overdraft facilities. 'Investors report that law firms are reluctant to seek external investment, and a large proportion of firms are concerned about losing control of the business. There is also a view that many firms do not present financial information in the ways investors expect and/or have a weak grasp of the value of their businesses,' the LSB said. Since licensing began in 2011, under one in five ABS were entirely owned by non-lawyers whilst 23 per cent provided other services such as accountancy, tax and financial services. 

Opportunities

Commenting on the research, Neil Buckley, LSB Chief Executive said: 'The investors we spoke to told us that they see opportunities for investment in the legal services market to improve efficiency, to fund innovation and to increase productivity. External capital is however not yet used as much in the legal services sector as might have been expected.' He added that a significant majority of ABS firms (66 per cent) either have already invested or are planning to do so, since they gained their ABS licence. 'This is positive evidence of the increased scale that allowing non-lawyer ownership was designed to enable. There is also evidence to link higher levels of non-lawyer ownership and the likelihood of having made an investment.'

No regulatory barriers

Mr Buckley also pointed out that the research showed that there were no significant regulatory barriers to investment in the legal services market. 'Nor does the cost of legal services regulation seem to be a barrier. Instead the key challenges are cultural - lawyers are reluctant to cede control of their businesses, preferring instead to rely on profits and reserves, or bank lending.'