Understanding Barriers to Entry, Exit and Changes to the Structure of Regulated Law Firms

Entry, exit and firm restructuring are important aspects of the ability of any market to respond and adapt to changing circumstances. The capacity to respond and adapt relatively quickly – often referred to as flexibility – is important for the effective performance of a market, particularly in periods of substantial change.

The study is concerned chiefly with barriers to entry, exit and ‘mobility’ (which includes business restructuring such as a merger) that may be caused or exacerbated by regulatory requirements, with particular reference to the barriers facing small solicitors’ practices. The approach adopted was based on a combination of desk research and 34 interviews with a range of people who are knowledgeable about the relevant market and market segments (including regulators, professional bodies, insurers, and advisors/consultants to law firms, as well as a number of regulated firms themselves). This exercise was supplemented, largely for purposes of cross-checking, by information drawn from three small scale surveys of legal practices, which produced 101 responses in total.