Personal injury CMCs fall from 2,300 to 1500 in nine months
'It is inevitable that we will see fewer businesses, but they are going to be bigger'
The number of personal injury claims management companies fell from 2,316 to 1,485 from January to September 2013, it has emerged.
The claims management industry as a whole shrunk by 23 per cent between April and September, according to a report from the MoJ's Claims Management Regulation Unit (CMRU).
While personal injury remained the largest sector, it experienced a 38 per cent reduction in size since September 2012.
The report said: "This is almost wholly as a result of the civil justice and related reforms to this sector introduced in April 2013 - primarily the ban on referral fees and ban on CMCs offering financial rewards or similar benefits to potential claimants as an inducement to make a claim.
"We anticipate that the personal injury claims market will continue to contract in 2013 and beyond as CMCs who are unable to adapt their business model to comply with the referral fee ban, exit the market.
Speaking at the Westminster legal policy forum yesterday, Kevin Roussel, head of the CMRU, said he believed the number of personal injury CMCs had reached a plateau, though the number of new applications had decreased quite dramatically.
He said members of the unit had visited 800 companies to enforce the ban on referral fees, and "as a direct result" some CMCs had surrendered their licences.
"It is inevitable that we will see fewer businesses, but they are going to be bigger," Roussel said.
"The sector is not about to die. It is adapting to the ban and the new situation. There is a core future and it should be a better industry."
On financial services CMCs, which mainly handle PPI claims, after a "boom year" in 2012, Roussel said there were now "some signs of contraction".
He went on: "It is the smaller ones that more often than not come to our attention. They are often not compliant when taking on business or dealing with the banks. Most larger CMCs have compliance officers."
Roussel said there were more than 500 licence surrenders across the industry in the last six months, with most of them coming from small CMCs.
"I suspect we will see some statutory action against businesses in the next six months," he added.