More than 30 of the top 200 UK firms are in serious financial difficulty, the Solicitors Regulation Authority revealed today.
The regulator is in what it calls ‘intense engagement’ with 160 firms at risk of failure, of which eight are in immediate danger.
At the SRA board meeting today, it was confirmed that one-fifth of those 160 are ‘high-impact’ firms in the top 200 in the country.
The regulator is trying to avoid any more costly interventions into firms which are in financial trouble and is working with those most at risk to minimise the impact to clients and the profession as a whole.
Samantha Barrass, SRA executive director, said: ‘Our supervisors are going to these firms and they are taking on board the messages and beginning to look at behaviours that need to change.’
As well as those 160 firms at risk, the SRA will write to around 2,000 in the coming weeks asking for key financial information.
The firms will be selected from sectors that are likely to experience financial trouble, such as those suffering as a result of the referral fee ban or cuts to legal aid funding.
The SRA will ask for information on drawings compared with firm turnover, outstanding debts to lenders and overdraft facilities and how often the limit has been exceeded.
The information will be fed into an ‘online portal’, with an initial 50 firms contacted to pilot the system to make sure it is reliable and secure.
Barrass added that firms showing signs of being in difficulty will receive immediate help from the SRA’s supervision team.
Asked about bank lending following high-profile firm failures earlier this year, Barrass also said SRA advisers are making it clear there may be less financing available in future.
‘Having said that, we have seen some odd decisions to keep on lending where the [supervision] team have fallen over with surprise at the decision of a bank to provide ongoing finance.’