The predicted demise of so many small firms affects the morale of the whole profession

It seems to have been a pretty bad year for solicitors. The demise of insurance company Balva was far more dramatic with potentially '¨much more wide-ranging consequences than the demise of Quinn (more of a whimper than a bang).

Compounded by an '¨about-face on the part of Berliner, many firms must have felt as if they were players in a never-ending farce. For those not in the know, Berliner was due to take on much of the indemnity business previously serviced by Balva but decided to revoke all of its offers, leaving many firms who thought that indemnity renewal had been painless to a last-minute scrabble for cover.

As it stands, some 130 firms seem to have entered the 60 day 'cessation period' during which they basically have to shut up shop. All that is currently known of these firms is that a good number (the SRA's best guess seems to be about 50) have failed to update the SRA as to their insurance position.

Mixed response

The SRA rattled through its intervention budget for the year in just a couple of months with some reasonably big names on the books, and its financial stability exercise is expected to result in the demise of many more firms. The SRA's focus on 'FinStab' has attracted a mixed response. Despite approval of the exercise from senior members of the Law Society, many have concerns that the SRA's involvement could cause the demise of firms which might otherwise trade through temporary difficulty. Having seen the SRA's approach, it is easy to see why firms which are the subject of FinStab investigations are frustrated.

The economy has picked up a little but the devastating effect of legal aid reform, the Jackson reforms and the LASPO ban on personal injury referral fees has decimated large swathes of the legal services market. Add to that ever-increasing overheads and an increasing regulatory burden, and the future is not looking exceptionally bright, particularly for those firms with already low margins.

Then we have the news that only around 85 per cent of practising certificate renewals were submitted on time. The SRA is apparently commencing its revocation procedures. It seems likely that a number of those non-renewals (which, after all, is an estimate based on last year) are people who for one reason or another can't or don't want to renew for reasons of death or retirement or simply getting a job that does not require a practising certificate.

A number may be accounted for by the 130-odd firms that are forced to close anyway. And the figures are slightly skewed by the fact that the SRA were expecting around 29,000 applications in respect of around 130,000 individual practising solicitors because most would be part of a group renewal. So '¨15 per cent equates to around 4,000 applications but we don't know if they are firm or individual solicitor applications.

Unfortunate but inevitable