As many as 800 law firms – double the number originally predicted – could be forced out of business as a result of the biggest shake-up of the legal aid system in 50 years creating a shortage in the market, a new study has predicted.

An independent analysis of the reforms by LECG, an economic consultancy, found that "a minimum of about 800" firms would have to merge into larger practices in order to survive once the Carter proposals are implemented.

Lord Carter of Coles, who unveiled the reforms in July, predicted that around 400 firms would have to merge or disband.

The reforms call for a wide-ranging overhaul to the £2.1 billion a year publicly funded legal aid system aimed at saving at least £100 million annually. The most controversial change, replacing hourly solicitors’ fees with fixed or graduated payments, is likely to force small firms that rely on criminal legal aid work out of business.

Today’s report says that while some small firms may survive through mergers there would still be significant impact on the availability of legal services.

"Apart from the impact on solicitors firms, a real risk is that supply might be disrupted and create local imbalances, making it unclear at this point whether there will be enough capacity to provide services in all areas," the report said.

The report also warns that low profitability levels at surviving firms will make legal aid work unattractive and gradually drive solicitors into other, more lucrative, areas.

"Many experienced practitioners and firms may leave legal aid work and prospects for long term performance may not be attractive enough to attract new recruits. This could do lasting harm to sustainability and leave the system in little better condition than at present."

The Legal Aid Practitioners Group, an umbrella group for legal aid solicitors, welcomed the report.

"It is good to have formal research that confirms what the LAPG has long said. The legal aid supplier base is very fragile, and needs support if clients are not to lose the services they need. It is in danger of being significantly damaged by the Carter reforms: even treatment aimed at saving the patient may kill if the patient is not strong enough."

Desmond Hudson, chief executive of the Law Society of England and Wales, said: "Solicitors go into legal aid work with a commitment to public service, but that commitment must not be exploited.

"This report shows that the Carter reforms can only succeed if there is more money on the table to make fee levels viable. Without reasonable and fair fee levels…the most vulnerable people in society will end up paying the price," he said.

A spokesman for the Department of Constitutional Affairs said they had
received a copy of the report and would be studying it, alongside other
submissions put forward as part of a consultation process due to end on October
12.

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