The idea behind Alternative Business Structures (ABS) is considered a controversial one. Although it can pave the way for blue chip organisations to provide legal services at a cheaper cost, it can also create competition between those organisations and traditional law firms.
The idea behind Alternative Business Structures (ABS) is considered a controversial one.
Hotly debated in the legal industry, alternative business structures were introduced in order to open up legal services to customers, providing a broader range of choice when deciding who to contact for legal advice.
What is an Alternative Business Structure?
The Legal Services Act 2007 introduced the concept, which allows ‘non-lawyers’ to act as managers of legal service providing firms; or alternatively ‘non-lawyers’ owning interests in firms. However, the Solicitors Regulation Authority (SRA) only started accepting applications as of the beginning of 2012.
Ironically dubbed ‘Tesco Law’ (initially Tesco had not even submitted an application), alternative business structures have paved the way for various blue chip organisations to provide legal services at what is considered to be a cheaper cost. Successful applications so far include The Co-Operative and Direct Line Insurance Group PLC which is due to partner with Parabis Law.
What impact will Alternative Business Structures have?
As more and more applications are submitted, the demand for legally trained staff to provide these services has increased. For the legal recruitment market, this has opened up a whole new area of target clients; as alternative business structure firms look to intake large numbers of legally qualified professionals at a time.
Inversely this could force traditional law firms, and in particular smaller firms, to lower the cost of their services in order to remain competitive. This will most likely be the case with firms providing B2C services, whereby the customer will regain some control in the market as more choice is provided.
It will be interesting to see what effect this will have on the existing, traditional legal recruitment market; in particular, whether this will impact law firms’ margins and therefore the budget they have for recruiting new staff. This will unfold as the market takes on its new shape.
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