Financial stability drive 'saved us several million pounds', Townsend says

The SRA's financial stability drive has saved the organisation "several million pounds" in intervention costs over the last 12 months, Antony Townsend, the regulator's chief executive, has said.

Speaking to COLPs and COFAs in Birmingham yesterday, Townsend said: "The legal sector is experiencing the most severe difficulties in modern times. The economic consequences resulting from the financial crisis continue to be felt by firms of all sizes.

"Let's not underestimate the extent of the problem - some firms are in dire financial straits.

"Our resources are not infinite, but being able to direct our resources during times of significant financial pressure to where they're needed most has been crucial in averting large scale disorderly collapses."

Townsend said firms either got themselves back onto a firm financial footing by working with the SRA, or secured a take-over or pre-pack, with interventions coming "only as a last resort".

He went on: "Regulation needs to be like radiotherapy treatment - highly targeted on the problem. If it is used too liberally or without sufficient focus, it risks doing more damage than good."

Much of what the SRA has been doing over the last seven years had been to improve targeting, Townsend said, helped by the gathering of high-level financial information.

"Focusing on firms in trouble has, in the last 12 months, saved us several million pounds in avoided intervention costs."

Townsend said the 2007 reforms had bought significant improvements to the way in which legal services were regulated, but more needed to be done to deliver a "truly modern system of regulation" for legal services.

"There is still too much restrictive regulation built into primary legislation; the relationships between the regulators and the professional bodies - in our case, between us and the Law Society - remain ambiguous and a cause of unhealthy distraction with which none of us can be satisfied; the scope of legal services regulation is still messy and there are too many regulators involved in a single sector."

Townsend added that he thought the legal services revolution was "neither bloody revolution nor timid incremental creep" and "more like the Prague Spring than the French Revolution".