Carnage in the personal injury sector yet to happen

The long-expected shake-out of the personal injury (PI) market will take place next year, following a delayed impact of the Jackson reforms, PI specialists claim.

Derrick Smethurst, head of PI at north-west firm Russell & Russell, told a roundtable hosted by First4Lawyers that having expected pre-Jackson work to last 12 to 18 months, they were still working through pre-Jackson cases and indeed, were still receiving instructions where the accident predates 31 July 2013, meaning the fees were dealt with under the previous regime.

It was a similar story for Andrew Simcott, head of business development at Merseyside firm Michael W Halsall, who added: "Historic [work in progress] will not last forever and the vast majority will probably be depleted within the next 12 months, so it is essential that firms are able to make their diversification strategies work within in the next 12 to 18 months in order to avoid failure."

Ian Pryer, founder of York firm Pryers Solicitors, agreed and said that the "carnage is yet to happen" before going on to suggest that fee earners in some firms may have been deliberately slower in turning around cases out of fear of what would happen after.

Profit challenge

The roundtable heard there was evidence of some providers trying to increase the cost of road traffic accident (RTA) work, but to levels that made profitability a challenge.

Simon Shaw, partner at Liverpool firm SGI Legal, said it was a matter of balancing cash against profit: "RTAs will generate cash quicker, whereas your non-RTA work will generate a more significant profit. But you need cash to reinvest."

Meanwhile, Richard Powell, joint head of personal injury at Manchester firm JMW, said approximately 30 per cent of his department's caseload was RTA: "It is valuable in terms of a quick turnaround and the quick cash flow you can get from it. I am starting to hear about some firms that are now turning away EL/PL in favour of RTA because they are actually getting so tight on the finances that they prefer that fast turnaround - it's their bailout option at the moment."

First4Lawyers director Qamar Anwar said that around a quarter of the cases passed on by the marketing collective were RTAs.

John van der Luit-Drummond is legal reporter for Solicitors Journal