The amount and clarity of information provided by the legal profession is a serious problem hindering small businesses, according to new report from the Competition & Markets Authority (CMA). Publishing a study in the provision of legal services on Friday, the CMA said, that legal service markets “were not functioning properly”, in large part thanks to a lack of transparency of pricing.
“That makes it harder for consumers to compare provider and identify value for money.”
The report highlights the particular challenges facing small businesses in need of legal advice. “For some businesses, not seeking legal advice may be driven by a lack of information on suitable providers or lack of transparency of cost.”
As a result, the report says, SMEs don’t compare providers enough, and rely on informal recommendations from their own networks when it comes to finding the right legal services.
Employment law particularly lacking
The report also highlighted a particular shortfall in readily available and well priced employment law advice for SMEs, which is leading to a growing number ending up at tribunals to settle disputes, which can be costly. “The number and frequency of claims that businesses face are linked to the number of staff they employ,” the report says. “The mean cost of representation of SMEs at the employment tribunal was £4379 in 2013. 12% of small businesses were members of organisations that provided cover for legal costs, and a further 30 to 40% of SMEs had insurance cover.”
The CMA’s findings were welcomed by the FSB, which expressed its pleasure that the “CMA is now looking to close the gaps in the market we identified, improving the legal services industry for small businesses.”
Mike Cherry, FSB National Chairman, said: “Many small businesses could benefit from greater use of legal services, but currently the market is complex and difficult to navigate. “Smaller firms can often fail to recognise a problem as a legal issue, or assume a legal resolution to be too expensive, time consuming or risky to pursue. Greater transparency on price and quality of legal services will encourage more small businesses to seek expert advice when necessary.