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There is no evidence that referral fees have caused consumer detriment in either the conveyancing or personal injury market, according to an economic analysis commissioned by the Legal Services Board which was published today.

However, there is concern that a focus on profitability causes some criminal advocates to be appointed for cases beyond their competency.

These were the conclusions of research examining the impact of referral fees prepared by consultancy firm Charles River Associates for the Legal Services Board.

In the conveyancing market, the report concluded there was no evidence that referral fees have led to a decline in the quality of work or to increases in price.

Studies show the average conveyancing fee when a referral fee is paid is £543, while the average price paid by consumers when no referral fees is paid is £687.

The report said that while referral fees have risen from around £50 to £100 in 2004, to £259 to £400 today, conveyancing prices have remained broadly constant.

It found customer satisfaction was high among those who use referrals from estate agents, with 90% stating performance was better than others used in the past.

A survey of estate agents conducted by Charles River Associates showed that transactions appeared faster with those who pay referral fees – 57% said they were faster compared with 2% who said they were slower.

Charles River Associates vice-president Kyla Malcolm said firms that paid referral fees charged lower rates than those that did not because they have greater certainty in the volume of work they receive, so they have invested in technology to increase their efficiency, and these efficiency gains are passed on to the consumer.

Malcolm said a ban on referral fees would lead to a return to the complex arrangements that existed prior to the introduction of referral fees in 2004.

She said home information packs could provide a way for firms to ‘get around’ a ban in any event, and the advent of alternative business structures could remove the need for referral fees where different businesses came together.

In the personal injury market, where referral fees are the most prevalent, the research found clear evidence that lawyers who pay referral fees receive more work than those that do not.

It said there was no evidence that an increase in referral fees has increased the prices paid by consumers for legal services or led to a reduction in the quality of services. This was evidenced by success rates remaining constant and rising levels of compensation.

The report concluded that referral fess have helped to facilitate motor claims, as greater marketing has encouraged additional claims that would not otherwise have arisen.

Malcolm said this shows referral fees have led to an increase in access to justice in this area.

In criminal cases, referral fees are banned, although the report said fee sharing is common and can have similar effects.

Interviews carried out for the research revealed that fee structures in place for the payment of criminal advocates had led to more use of in-house advocates, and this was not caused by the fee-sharing arrangements.

There were concerns that a focus on profitability causes advocates to be appointed for cases beyond their competency, which could impact adversely on the defence of the accused.

The report said this could lead to a potential reduction in the number of experienced barristers in the future, or a change in the career path for advocacy with more in-house advocates and fewer independent barristers.

Malcolm said that in light of the findings, it would recommend to the LSB that there is no need to change the current rules in relation to referral fees.

To reach its conclusions, the firm reviewed existing research, interviewed 40 stakeholders, and carried out a survey of estate agents.

The economic analysis is one of five pieces of evidence that will be considered by the LSB to determine its decision on the issue of referral fees.

LSB strategy director Crispin Passmore said the consumer panel’s advice should be with the board by the end of May, and following workshops with stakeholders and any further analysis required, the board should be able to make a decision on its position by the end of the summer at the latest.

Catherine Baksi, The legal Gazette