CLC warns firms to prepare for "significant fall in work volumes"

The Council for Licensed Conveyancers (CLC) is recommending that firms should stress test their businesses for "resilience to a significant fall in work volumes".

The 2007-08 Global Financial Crisis saw a more than 40% drop in conveyancing transactions and the turnover of CLC-regulated firms fell by 27% before largely recovering the following year.

The total turnover of CLC-regulated firms in 2009/10 was £85m, having recovered from the crisis. By 2020 it was £277m – a more than three-fold increase.

The CLC says that while it has been an "extraordinary decade and a half... we are now entering a very different world".

In a note to conveyancers, the Council said there is "a growing consensus that property transaction volumes look set to fall and some of you are telling us that there is already evidence of that".

The CLC added: "That might be expected anyway given the very high volumes in 2021. However, increasing interest rates, the Bank of England’s stated expectation that the UK economy will be in recession until summer 2023, the falling availability of mortgage products and the tightening supply of properties for sale will all contribute to falling transaction numbers.

"Against this background, all law firms should consider how they would respond to a significant downturn in the economy. Those that are focused significantly or entirely on conveyancing would be wise to prepare a contingency plan that sets out steps they would take to protect the business in the event of a fall in transaction volumes similar to that seen in 2007-08 – a 40% decrease. That plan might include cost savings, increasing the profit margin on services, the potential for growing income from probate services (which are less affected by the economic cycle), falling back on reserves or other steps that the managers and owners believe necessary and effective.

"Preparing for the worst is vital for the resilience of the legal services sector and for the sustainable provision of conveyancing and probate services to the public."