As many as 160 UK firms are facing financial difficulties according to the Solicitors Regulation Authority (SRA), with eight judged as being at an “immediate risk” of collapse.
Over the past few months, the SRA been making clear its concerns about the financial position of a number of firms across England and Wales. At a board meeting this week the SRA underscored those concerns, confirming that around 160 were currently in “intensive supervision” because of its fears about their financial stability.
They are understood to include 30 of the UK’s top 200 firms, with eight of the 160 judged as being at an “immediate risk” of collapse.
“Some firms have started to struggle for a range of different reasons, including changes to the legal services market and the continuing difficult economic conditions,” an SRA spokesman commented. “As part of the work to manage these risks, the SRA needs to build further its understanding of which firms in those markets experiencing the greatest pressure are weathering the pressures and those which are not.”
The regulator added that it needed to expand its understanding of the financial position of the so-called high impact – or top 200 – firms as well as smaller competitors.
The SRA confirmed it would therefore be seeking information from around 2,000 firms in the populations deemed high risk over the next few months, asking for key financial information sufficient to support an initial assessment of whether or not a firm might be at risk of experiencing financial difficulties.
“Some firms will be contacted by supervisors, others will receive an email asking them to submit the information,” said the SRA. “All firms involved will be given further information about the process, the SRA’s approach to ensuring the security of the information provided and contact points for any questions.
“Those firms contacted should understand this is not because there are concerns about their particular financial position. Instead, at this stage, it will be because the firm has the potential to be either high impact or in a sector where financial pressures are greater.”
The SRA has brought together all of its advice to firms on managing finances – including responsibilities outlined in the handbook and a series of good and poor behaviours against which to measure practice – on its website.
It also urges firms to get in touch at the earliest opportunity if they are experiencing difficulties.
The SRA has the power to intervene in firms that are experiencing financial difficulties and does so several times each year. An intervention, which is designed to protect clients’ interest and money, results in a lawyer’s authorisation to practise being revoked and practice money and client papers being transferred to the (24 October 2012).
Earlier this year, the SRA carried out interventions into Birmingham firm Blakemores and Atteys of South Yorkshire, at an estimated cost of £800,000 and £1m respectively.
There were 64 interventions carried out by the SRA in 2010, 62 in 2011 and 37 in 2012. In the first half of 2013, there have been 19.