A leading banker has predicted that investors will be queuing up to enter the legal services market when alternative business structures (ABSs) come into force from October.

Former barrister John Llewellyn-Lloyd, now head of mergers and acquisitions for Espirito Santo, said the market was an attractive prospect for many investors looking for new opportunities.

The investor also warned law firms - especially those in the mid-tier from below the top-20 firms down to the top-150 - to be prepared for rapid changes that will come when the effects of the Legal Services Act are felt.

‘Change is inevitable and will be disruptive,’ said Llewellyn-Lloyd, speaking at a conference on the future of ABSs organised by north-west firm Goldsmith Williams.

‘There is no question that in five years’ time there will be fewer law firms and a lot of external investment having gone into the sector.

‘It’s a very attractive, large market with £27 billion in revenue per annum.

'There are good growth prospects and it’s very fragmented, which is a good background for external investment.’

In sharp contrast however, research published by accountants Baker Tilly this week suggested diminishing interest in external investment and ABSs on the part of law firms.

Just 45% of the 100 firms of varying size that responded to the survey said they were considering using an outside investor, compared with 56% last year.

Under a quarter of firms said they were willing to consider incorporating to provide a currency for investment in the form of shares.