Is this indicative as to why it’s quicker to complete a meaningful facial hair project than a property transaction?
You may have heard of McDonald’s, or Tesco? Perhaps you’re familiar with Volkswagen? In the worlds of fast food, supermarket shopping and car purchase these brands are dominant – the market leaders.
As such, it’s generally accepted that market leaders and, indeed, their close competitors have large shares of a total sector. McDonald’s has 50% of the fast-burger market, Tesco has 28% of the grocery business and Volkswagen commands 9% of all cars sold in Britain. The top five car companies own 33% of the whole automotive pie.
Maccies, Burger King and Five Guys sell 70% of all the ready-to-eat hamburgers sold in the high street.
And Tesco, Sainsbury’s and Asda, the big three supermarkets, dominate with 56% of all household shopping purchased from their shelves alone. Nearly £6 in every tenner spent on beans, milk and washing powder is spent with these giants (total combined market cap £42 billion).
But what the hell has all of this got to do with conveyancers, you ask?
Well it turns out that despite 980,000 residential transactions in England and Wales in the last 12 months, the largest legal firm brand involved in the conveying of residential property transactions appears to have completed on just 16,700 of those. That’s a 1.7% market share from the biggest in the business, Taylor Rose.
Simplify, owner of six brands including My Home Move, DC Law and Premier Property Lawyers, has around 5% combined. Only.
It takes about 40 of the top conveyancer brands to amass a measly 20% of the market.
‘Fragmented’ doesn’t quite cover it.
So why hasn’t a big, truly dominant participant emerged in the legal space?
Why are UK property lawyers unattractive as scale ups?
I dare say that there will be ‘helpful’ comments below that inform us all why this is – but here’s my two penneth…
Conveyancing firms have painted themselves into a corner financially with such low fees that net margins are pitiful. You’re far better off buying a McDonald’s franchise and flipping burgers for a living than advancing your ambitions as the owner of a property law firm.
It seems incredible to me that as property transactions have become more complex – and therefore more risky and with commensurate increases in professional indemnity premiums – you continue to sell yourselves short and charge less to transact someone’s most precious asset than the cost of a decent meal out for four in London.
No wonder conveyancing practices have shrunk in number from 5357 in 2015 to barely 3500 now – a 35% reduction. Who would want one? Only the fiscal masochist, surely?
And, I’m sorry to say, no wonder too that service levels have slipped to the extent that it takes longer to complete on a leasehold sale or purchase now than it does to grow a decent beard.
It’s almost as if you should charge more. No, as you were.
3 responses
Conveyancing is heavily regulated, often locally specific (many clients still like face-to-face meetings), and despite the emergence of prop-tech is still labour intensive. It is also, even in the 21st century, trust based. However, is the main reason as Russell believes, because margins are low?
Conveyancing is most definitely not a sector that scales easily, and that is not necessarily a bad thing.
Regulation, lender requirements, and the public’s unwillingness to pay high fees all limit the potential for mass scaling.
But scale does not necessarily equal quality. A well-run, professional conveyancing practice can thrive without needing to be a huge business. And fragmentation in conveyancing is perhaps inevitable, given the inherent legal and regulatory complexities of our property law system.
This system is centuries old, full of complexities — leaseholds, the Building Safety Act, title defects and (soon) new Commonhold — that cannot just be eliminated with the wave of a wand.
Have the writer considered that maybe clients choose to use a firm that they know and trust, that has local knowledge and, in many cases, knowledge about the client and their family?
Maybe they’ve tried one of the call-centre style firms and dealt with being passed from piller to post by unqualified paper-shufflers and decided against going back down that route.
Should we charge more? Almost certainly.
But I don’t think that’s why the bigger players don’t control the market. It’s simply that they don’t give the standard of service that buyers and sellers want, which is why none of them use the “repeat client” business model, and instead pay estate agents to refer clients. They know they aren’t going to get repeat buisiness based on the service they provide.
With McDonalds, Tesco etc, you are buying a consumable. If you buy the wrong thing, or don’t like the quality – no major harm done.
When you buy a house, if you get a bad service or bad advice, it’s a far more serious proposition, so buyers are going with a more trusted provider.