ABS, it’s easy as 123: Co-op legal has excellent year in 2019

May 23, 2020

2 min read

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What's going on here?

Co-op’s legal services business has reported a whopping 165% increase in profits for 2019. In the midst of the coronavirus pandemic, the legal arm of the consumer Co-operative group has announced pre-tax profits of £6.1m and a turnover of £40.1m.

What does this mean?

This 13% increase in turnover has cemented Co-op’s position as the leading personal legal services provider in the UK. Co-op was one of the first applicants to receive authorisation as an alternative business structure (ABS) in 2012, under the Legal Services Act 2007. This significant development in the structure of legal services meant that non-lawyers could own and invest in legal businesses, and law firms could be listed on the stock market. These radical reforms in the legal sector led to the coining of the term “Tesco Law” to refer to such alternative business structures. The Co-op group took advantage of this relaxation in the rules around legal business ownership and turned their own legal services arm into an ABS. In its first few years, it incurred losses, but with an increase in sales in the estate planning, probate and family law practice, they have been able to drive a strong growth in profits.

What's the big picture effect?

While this is great news for firms operating in the ABS sector of the legal services industry, this may be a cause for concern for traditional law firms. When introduced in 2012, the Solicitors Regulation Authority (SRA) heralded the arrival of these business structures as a boost to innovation, competition and customer service in the legal industry. This shake-up of the legal sector threatened to end traditional law firms’ monopoly over the legal sector. It has been 8 years since the introduction of ABS in the UK, but has anything really changed?

“Tesco Law” has resulted in a mixed bag of results for these ABSs. While it took the Co-op group several years to report these profitable numbers, other firms did not stick around for too long. Saga, the holiday company, was one of the first firms to abandon its ABS venture over lack of profitability. Although the legal services industry did not experience the so-called “big bang” with the relaxation of these rules, this development, along with the entry of the big 4 accounting firms into the industry brought about some welcome changes. Many traditional firms have increased their focus on technology, introduced flexible working, and abandoned the fixed-fee model to maintain a competitive edge.

Elsewhere, the American Bar Association (ABA), is set to follow in the UK’s footsteps by bringing in regulatory changes that increase the quality and affordability of legal services. However, there is still skepticism and resistance surrounding ABSs and the Association is clear to not explicitly adopt these structures. It remains to be seen if Co-op’s successful year brings a new wave of ABSs to the UK market.

Report written by Maya Sajeev

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