Financial difficulties force 30 top 200 firms into 'intensive engagement' with SRA

The precarious financial position of many law firms was highlighted at the SRA board meeting this afternoon when it emerged that around 30 of the top 200 law firms had entered "intensive engagement" with the SRA over financial difficulties.

Samantha Barrass, executive director, said a total of 160 firms were in serious financial difficulties, including eight at "immediate risk".

She said around 20 per cent or 30 of the 160 firms came from the top 200, but did not say whether any of them were in the much smaller group at immediate risk.

Barrass told the board that a wider group of 400 law firms were under active management by the regulator, with "key indicators" such as drawings to turnover, net profits and overdrafts all being studied.

She said the SRA planned to extend its monitoring to a further 1600 firms through a secure IT portal.

"The firms will receive an email from the SRA and enter financial information," Barrass said. "We are approaching the testing of the system very carefully."

The system is to be piloted with 50 firms over the next two weeks, before being rolled out to the remaining 1,550.

Barrass said that if a large proportion of firms were found to have financial difficulties, it might be necessary to introduce the scheme in stages.

Earlier in the meeting the board approved a proposal to transfer the cost of interventions from its annual accounts to the Compensation Fund.

The move was triggered by the amount spent on interventions earlier this year, including £1m for Atteys and £800,000 for Blakemores.

The SRA said that this would mean asking solicitors for £13.4m in contributions from the Compensation Fund, resulting in an indicative fee of £56 for individuals and £836 for firms holding client money.

However, the regulator said that even if the cost of interventions was not transferred, it would have recommended contributions of £10 for an individual and £150 for a firm.

The regulator is expecting the number of interventions this year to rise by 73 per cent from 37 last year to 64 this year and "each year thereafter".