The smallest law firms have been hardest hit by this year’s increase in the cost of practising certificates, a finance provider has claimed.
Professions finance provider Syscap said sole-trader firms had seen the cost of renewing PCs rise by as much as 40% this year.
An increasing number of firms have asked to spread payment.
Thousands of firms are expected to complete their online renewal this week ahead of Friday’s deadline.
Philip White, chief executive of Syscap, said the disparity between large and small firms was caused by an increase in the flat fee for the compensation fund. This rose from £772 in 2011/12 to £1,340 this year and must be paid by all firms holding client money, regardless of size.
White said: ‘The big-name law firms will not even notice the rise, but it’s a different story at the other end of the market. The legal sector tends not to be able to keep a lot of cash in reserve and that is particularly true for the smallest firms.
‘Over the last few years we have seen an increased demand from law firms for funding to renew their PCs and we expect that trend to continue and grow this year.
‘Many smaller firms are worried about where they can find the extra cash to cover this increase – they are all too aware of how hard it is to get traditional bank funding.’
A single-partner law firm with a £50,000 turnover will face a 41% overall fee increase, according to Syscap’s calculations. In contrast, a firm with 350 lawyers and a £50m turnover will have to pay an extra 10%.
The Solicitors Regulation Authority, which announced the increases in July with the endorsement of the Law Society Council, has said it is necessary to increase the compensation fund fees to ensure funds are sufficient to cover predicted claims, and the minimise the likelihood of having to seek further funding in-year.