Conveyancing firms are warned to ‘prepare for the worst’ with a significant fall in work volumes expected with the predicted economic crash imminent. An ‘advisory note’ has been issued by the Council for Licensed Conveyancers (CLC) recommending that the firms it regulates should get ready for a 40% fall in property transactions and stress test their businesses.
The changes in the economy, which remind us of the Global Financial Crisis in 2008 when deals fell by nearly half, mean that conveyancers are likely to see work volumes plummet. That year, CLC-regulated firms saw turnover fall by 27% before making a recovery in the year that followed. With rising mortgage rates, the falling supply of properties for sale and the Bank of England forecasting a recession until the summer of 2023, firms must act now to prepare for the worst.
By 2009/10, CLC- regulated firms had recovered from the crisis and saw a total turnover of £85m. By 2020, this had increased almost three-fold to £227m. The stamp duty deadlines in the year to April 2021 led to an exceptional year, with a further growth of 26% in turnover, to £349m. However, with the uncertain economic outlook upon us, the CLC has issued an advisory note which you can read here warning that we are now entering a very different world with a challenging global economy putting pressure on UK businesses and citizens. Wiser conveyancing solicitors such as Sam Conveyancing are already ensuring their financial and management processes are suitably robust.
What can firms do to build resilience?
The CLC is urging all conveyancing solicitors to consider how they will respond to the challenges that lie ahead and to determine how they can build resilience. Businesses which focus significantly on conveyancing are strongly advised to take steps to protect their business by preparing a contingency plan. The CLC suggested looking at cost savings, ways to increase profit margins on services and potentially growing income from probate services, as this is an area less affected by the economic cycle. It suggested some firms will need to fall back on reserves in order to weather the economic storm.
With the rising cost of living, inflation already above 10% and interest rates soaring, it is impossible to deny the challenges. However, the latest figures from the Land Registry show that house prices are still rising and the Bank of England has announced that mortgage approvals actually climbed in July. The market doesn’t appear to be on the verge of catastrophe, but it would still be unwise not to heed the warnings the CLC is giving.
The positives of a downturn
Lloyd Davies, Managing Director of Convey Law and Chairman of the Conveyancing Foundation suggested that a slowdown may come as a relief for many conveyancers and that a downturn in instructions will offer them time to catch up, allowing transaction times to decrease. Natalie Moore, Managing Director of Conveyancing suggested that conveyancers should not rush or panic and should keep up to date with industry news rather than reacting to any media scaremongering. She suggested this period should be used to reflect on the business and review internal policies and procedures.
The CLC will be able to provide an update on the situation when it issues its Regulatory Return questionnaire in November.