27 May 2018

Spotlight on risk: commercial pressures

Our Risk Outlook was published in April 2016. This sets out our three priority areas of risk in the legal services market and provides some useful context to accompany them. In the first of a series of three features, we summarise the priority area of commercial pressures. More detailed analysis and evidence is provided in the Risk Outlook, which can be found on our website.

Commercial pressures are inevitable but need to be managed. How do you know when the pressures you are facing become excessive? What is your role in these situations and what is ours, as the regulator? We answer these questions briefly below and in more detail in our Risk Outlook.

Our analysis has found that some parts of the Bar have experienced a wide range of commercial pressures. In our Risk Outlook, we explore some of the most significant, including:

  • The impact of the Legal Aid, Sentencing and Punishment of Offenders Act, including cuts in public funding; and
  • Increasing competition for work undertaken in the courts or elsewhere by other regulated lawyers or the unregulated sector.

Significant and sustained pressures and lack of funding can impact adversely on the availability of some services and the Bar's long term sustainability. This over time may limit the specialist expertise that the Bar, as a whole, provides to consumers. Excessive pressure can also affect the standard of service provided by barristers and their professional independence and integrity. The likelihood of unethical behaviour is low, but the impact could be high. So even if we see no disturbing trends at the moment, this is an area against which we must remain on guard.We are concerned about:

  • The quality of service at the Bar falling, whether intentionally to cut costs or unintentionally due to overwork or stress;
  • Barristers considering the use of referral fees (which are banned under our Handbook) to obtain clients; and
  • Barristers agreeing to retainer fee arrangements that limit their independence (for example if they exist purely to prevent barristers from acting for other consumers).

Commercial pressure can also be a positive thing. By encouraging efficiency and innovation, it can provide benefits for consumers, such as lower prices and better quality service. Specific examples include:

  • Barristers diversifying into new areas of work in a carefully managed way. This includes ensuring they are competent and have adjusted relevant processes and procedures;
  • Marketing directly to the public and offering services at a lower cost than if an intermediary were involved; and
  • Both the introduction of new legal structures, through entity regulation, and innovation within the more-traditional chambers model.

Our role, as your regulator, is to help inform you and others about how the market is changing. We also need to balance how we protect consumers with the flexibility we give you to innovate. Therefore it may not be appropriate for us to intervene when the Bar is experiencing commercial pressures. However, where we do intervene, the consumer interest will always be our main concern.

As barristers, it is important to ensure that your independence and integrity are not influenced by the pressures you are facing. It is paramount to understand and plan for the ever-changing environment and if you diversify into new areas of work, maintain your competence in doing so. If you do decide to stop practising, ensure your clients are fully aware and understand what it means for them. The Risk Outlook can be found on our website.