The number of practising solicitors in the North East has fallen for the first time in 20 years, new figures show.
And controversial cuts to the legal aid budget are partly to blame, according to the Law Society.
It follows claims that the justice system is in a “state of crisis”, with solicitors and barristers furious at Justice Secretary Chris Grayling’s plans to cut fees.
Professionals across the North East staged a walk-out in protest at the changes in March.
And there was embarrassment for the Prime Minister earlier this month when a A £5m fraud case collapsed after barrister Alex Cameron QC, David Cameron’s brother, successfully argued that legal aid cuts made a fair trial impossible.
The Law Society’s Annual Statistics Report found that there were 3,114 practising solicitors in the North East, down from 3,172 in 2012.
Desmond Hudson, Law Society chief executive, said: “Change and competition within the legal sector is intensifying and this is having a major impact on many businesses.
“An improvement in the economy has not yet fed through to all solicitors, and many smaller firms are struggling in the wake of fundamental changes in areas of work such as legal aid, civil justice and family law.
“The Law Society is helping solicitors and their practices adapt to the regulatory and management challenges, so that they can continue to provide high quality legal advice that makes a positive contribution to businesses, the public and the rule of law in England and Wales.”
The Government is defying opponents and pressing ahead with plans to cut criminal solicitors’ and barristers’ fees by 17.5%.
The number of accredited legal aid firms will drop from 1,600 to less than 400, and big firms will be able to bid for multiple legal aid contacts, increasing profits through economies of scale. The Law Society warns this will lead to large firms dominating the market.
A North East peer has also hit out at plans to cut legal aid in judicial review cases, in which a judge reviews the lawfulness of a decision or action made by a public body.
Under new rules introduced by the Government, legal aid will only usually be paid if a courts rules that judicial review proceedings can go ahead.
But speaking in the House of Lords, Labour peer Lord Beecham, a former leader of Newcastle City Council and a former solicitor, said the change would make it harder for the public to challenge decisions made by the Government or its agencies.
Big businesses, such as property developers, would have the advantage because they could afford to pay, he said.
Lord Beecham told peers: “We are, it seems, being driven ineluctably down a road leading to a two-tier system of justice, in this and other contexts, in which access is increasingly limited to those with the means to pay - a developer in a planning context perhaps, as against the local resident.
“When the defendant is the state or an executive agency it is all the more important that the citizen can have recourse to law.”
A number of Conservative and Liberal Democrat peers also criticised the planned change.
Justice Minister Lord Faulks insisted: “Civil legal aid for most judicial review cases will remain within the scope of the legal aid system. These regulations relate solely to the remuneration of legal aid providers and will ensure that limited legal aid funds are not used to remunerate weaker cases.”