Not an industry that many of you will have sympathy with but I found it interesting.
The Solicitors Regulatory Authority has formally given notice to 153 law firms that they must close for business by the end of 2013 if they can't sort out their professional indemnity insurance. They've also been barred from taking any new clients or instructions from existing clients until that time.
The insurance companies are rubbing their hands in glee after the SRA insurance safety net was withdrawn meaning they now have law firms over a barrel. In the past, there was a guaranteed insurer of last resort for law firms that struggled to get PI insurance and could prove they acted in good faith to try to get it, the SRA removed that safety net as anti-competitive. Some insurers are now asking some troubled law firms for nearly 25-30% of revenue for insurance that's not close to A-rated, I've heard rumours that a good number of small firms of fewer than 10 lawyers are being asked for even higher rates or outright declined by everyone.
The estimate is that around half of those 153 firms will be formally closed at Christmas due to inadequate insurance. That's one hell of a Christmas present for a lot of people, especially if you think that the typical medium sized law firm has about half as many non-lawyers as lawyers.
But then, everything's rosy in the UK now, there are fewer people claiming unemployment benefits (hmm...), the FTSE 100 and 250 are rising steadily and large firm corporate profits are increasing.
The consequence of this for those of us not lawyers is that our interactions with solicitors firms will inevitably become more expensive. One of the hardest hit legal groups by this insurance increase are conveyancers and firms that have a lot of property law services for housebuyers.
As an aside, this may also cause a few mid-sized law firms to go bust anyway as many are operating far too close to insolvency as it is. About 5 years of recession trading have reduced many firms to hand-to-mouth financing and massive debts to keep operating. There are still a lot of big corporate casualties to come from this recession.