Legal needs of small businesses

Which characteristics of small businesses and the legal issues they face have the biggest influence on whether and how they seek advice on those issues?

• Around a third of small businesses had a legal problem in 2017 and around half who reported a legal issue said it had a negative impact
• Total annual losses to small businesses due to legal problems were estimated to be £40 billion
• Over 1 million individuals in small businesses suffered ill health due to legal problems
• As in previous surveys, engagement with legal service providers remained limited – 50% of small businesses handled their legal issue alone and only 25% sought professional advice

Main factors that drive seeking legal advice

• Small businesses that ask for help from outside business friends and colleagues are 6.5 times as likely to seek professional advice
• When small businesses face a tax or business structure problem (e.g. partnership break-up, sale of business) they are five and four times as likely to seek advice respectively
• Small businesses that characterise the problem as legal are four times as likely to seek advice
• Small businesses that have an ongoing contract with any organisation to provide them legal services are four times as likely to seek advice when facing a legal issue
• When small businesses face “inability to complete scheduled work”, they are twice as likely to seek advice
• Small businesses that believe that “legal service providers are transparent about their costs” are twice as likely to seek advice when facing legal issues

Conclusions

• The importance of transparency in the price of legal services is highlighted by the research
• Advice-seeking would increase if more information is shared on small businesses’ rights and the range of services on offer to resolve legal issues
• Although the monetary cost of the problem to the business is important, there is no evidence of a simple relationship between cost of the problem and advice-seeking behaviour

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CILEx Regulation is bringing in new Transparency Rules which aim to provide consumers with the information they need. The proposed rules are currently with the Legal Services Board and subject to their approval will become a requirement from early January 2019. They will apply initially to regulated firms providing legal services in residential conveyancing and probate.

Consumers need to know what services different firms are offering, and how much it will cost, when they are choosing which firm to use. They need also the reassurance that in the unlikely event that something goes wrong, there is a procedure for dealing with problems, insurance and regulatory protections. See below how CILEx Regulation’s approach fits together.