Questions over future of RDAs and Catalist as spending cuts hit

Sweeping curbs on public spending are set to have an early impact on the legal sector, with the Government this week announcing deep cuts in regional development agencies (RDAs) as part of an initial £6.2bn round of cuts.

England's nine RDAs will lose £270m this year – roughly 20% of their budget.

The bodies are considered important clients in many regional markets. However, RDAs, which are known to have little support in the current Government, are also seen as vulnerable when further cost-cutting measures are imposed.

The RDA Advantage West Midlands this month confirmed five firms to its new legal panel: Brown Jacobson, Eversheds, Hammonds, Mills & Reeve and Walker Morris, while RDA Yorkshire Forward recently appointed Walker Morris, Eversheds, Hammonds, Addleshaw Goddard, Pinsent Masons and Cobbetts. East of England Development Agency is set to announce the result of its panel review shortly.

Eversheds relationship partner for Northwest Regional Development Agency Paul Hothi (pictured) said: "Legal spend will certainly be hit but given the economy we have had for the last two and a half years, we have had to get used to this. We have had to be very innovative with our pricing to get onto these panels in the first place."

The confirmation of public spending cuts, which were announced on Monday (24 May) by the Conservative Liberal coalition Government, have also turned attention to Whitehall's procurement of legal services.

The Government's procurement panel, Catalist, is likely to come under renewed pressure both to cut legal spend and to more effectively centralise legal buying. The body has faced mounting criticism from law firms in recent years for excessive bureaucracy, low rates and failing to deliver on work volumes as many public bodies fail to use the panel.

Despite 48 firms winning places on the much-touted panel, the majority of firms see little work from it, with several major Government departments, including the National Audit Office (NAO) and Ministry of Defence, operating separate advisory panels.

Last month the Department for Work and Pensions became the latest Government body to turn away from Catalist, appointing Field Fisher Waterhouse as its sole preferred adviser, though the firm is a Catalist-approved adviser. Ironically, a report published last week by the NAO criticised public bodies for wasting money by failing to pool their buying power.

DLA Piper partner Richard Bonnar said: "In the short term there could be negative consequences [because of the cuts]. Demand for Catalist is only likely to increase if a mandate is sent out from central Government to use the panel."

Field Fisher partner Michael Chissick commented: "Good value is about offering top quality expertise, not just good rates and given Government 's need to push down public spending Catalist will certainly offer the best value in those terms. Given the current climate, I would expect the use of Catalist to increase."

The DWP will see its budget cut by £535m as part of this week's announced cuts, while other cuts include a £325m reduction at the Ministry of Justice.

Renewed expectations of a tough squeeze on government spending has also led to predictions that many commercial law firms will abandon public work entirely unless they can secure substantial work volumes to compensate for low rates.

Simmons & Simmons projects partner Richard Dyton commented: "In the short term public sector work will be challenging because it will be subject to cancellation or freeze. However in the medium term it makes sense to pursue it because the UK needs infrastructure and even if you spread the cost over a longer period you still have to pay."