I was a reporter covering Canary Wharf when Lehman Brothers folded.
As a journalist, it was one of those days you dream about – the disgruntled workers willing to tell you everything, the imagery of the staff leaving with hastily packed boxes. (We even found out the local strip club had its best ever day’s takings, a nugget of information that almost certainly didn’t find its way into the Financial Times.)
The abiding feeling was one of shock – this gigantic bank, enclosed in a great glass tower, was surely too big to fail, we thought. Even as those gloomy bankers headed through the revolving door for the last time, the question most were asking was, how did a company so big manage to collapse so suddenly?
It was a salutary lesson that nothing is sacred in business. Which is why it was little surprise to me to hear that a good 20% of law firms in serious financial difficulties come from the top 200.
The release of the news appeared inadvertent on the part of the Solicitors Regulation Authority, truth be told. Executive director Samantha Barrass told the board 160 firms were in ‘intensive engagement’ and it was only when a board member let slip the 20% figure that we realised the scale of the issue.
We’re talking around 30 firms with hefty turnovers and presumably a decent number of staff. If even a handful of the intensive engagements turn into interventions, the cost is going to go through the roof.
There is a sense that the SRA is chasing its tail with regard to keeping a lid on financial security of firms (and the subsequent protection of clients).
Earlier in the board meeting, Barrass announced a mass health-check of some 2,000 firms that might be feeling the pinch from legal aid cuts and civil justice reforms. It’s an idea we’ll put in the box marked ‘well-intentioned but ill-conceived’.
There may well be some at-risk patients who want regular contact with their doctor to pick over the bad news, but surely more will want the time and freedom to concentrate on getting better?
These firms are going to be emailed asking for detailed financial information. What the SRA will then do with the info – not to mention how it will find the time and resources to analyse 2,000 responses – is unclear.
The firms in question face an awkward choice: they can respond in full, using precious hours to outline exactly what trouble they’re in and invite a knock on the door from the regulator. Or they can tell the regulator to mind its own and invite the accusation they have something to hide.
I’m sure the SRA wants to do best by solicitors – they’re not the monsters our comments section would have you believe and there are genuinely talented people in charge. If anything, they need more help. The government has pulled the rug out from under solicitors and almost seems to be relishing the chance to kick a few to the kerb.
Now the SRA (and the profession as a whole) is left with the job of propping them up, it’s high time more financial support came to help it carry out the job. They should be banging the door of government to request some leadership and support on this issue.
When some banks threatened to join Lehman Brothers on the scrapheap, the government stepped in to bail them out.
With so many big firms in trouble, the profession has been left to fend for itself with just the SRA left to administer the plasters. The regulator looks to be in danger of venturing out of its depth.
John Hyde is a Gazette reporter
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