Study reveals high closure rates in legal profession

Witan Solicitors has recently conducted an in-depth analysis of the legal industry's business dynamics, uncovering significant challenges faced by new entrants. By examining data from Companies House, the study focuses on the incorporation and closure rates of new legal firms from January 2019 to December 2023.

The findings reveal a sobering reality: 30.89% of new legal service businesses have shuttered their doors within this period. Out of the 13,301 firms established, approximately 4,110 have entered administration, liquidation, or have been dissolved.

The study provides a nuanced breakdown by business type. Firms involved in justice and judicial activities exhibit the highest mortality rate at 40.82%. Barristers' chambers also face substantial hurdles, with a 38.9% closure rate. In contrast, law firms exhibit slightly better odds, with only 1 in 4 (or 25%) of solicitor practices ceasing operations since 2019.

Qarrar Somji, Director of Witan, commented on the findings: “It is fair to say that the legal industry is one of the hardest to enter. From building up a strong client base and marketing your firm to hiring the right team and getting SRA approval, it can be challenging for legal service providers to establish themselves. Providing legal services involves more than simply practising the law and requires strong business acumen. Our research provides potential entrepreneurs with a clear idea of how successful their business will likely be. But more than that, it offers a real indication of how challenging it can be to provide certain services.”