Cost of SRA compliance “forcing small firms to close”, says Law Society survey


Shutting up shop: small firms struggling with compliance

More than one in ten small law firms questioned in a massive survey of solicitors plan to close down or merge as a result of the cost of complying with regulatory obligations, Law Society research has revealed.

There were also strong feelings that solicitors do not get value for money from their practising fees.

One thousand law firms were questioned during April and May on the Solicitors Regulation Authority’s regulatory performance, in the Law Society’s third biennial survey of its kind. They will be contacted again in autumn 2012 in a follow-up survey of experiences of the new regulatory regime.

More than two in five firms believed the cost of compliance to be excessive. Half agreed that compliance costs were harmful to their business, although more than two-fifths said they were not. Some 57% considered the SRA’s information requirements to be excessive.

More than two-thirds reported the compliance-related administrative burden on fee-earners had increased in the previous year, with a fifth saying they had turned away clients purely on the basis of the associated administration. Some 13% reduced the range of legal services provided because of compliance costs.

Overall 9% of firms were planning to close or merge as a result of compliance costs – 11% of small firms, and 5% of medium and large practices.

In an indication that many firms still do not have a clear understanding of their overheads, almost a quarter (23%) of firms with fewer than 10 partners did not know how much time was spent on compliance. Among those that did know, the average was 27 days a year.

Firms with more than 10 partners had on average four staff members dedicated to compliance issues, with the largest team numbering 50.

On the practising fees that go to fund the SRA, a higher proportion of firms disagreed than agreed that the individual fee and firm charge represented value for money and that the costs to the SRA of regulating are made transparent.

Awareness of OFR, which came into effect last month, was generally high, at 88% overall. But strikingly, given the proximity of its introduction, 12% of senior firm representatives questioned were not aware of the change.

Attitudes towards OFR were mixed, with more than half (56%) welcoming the move away from a rules-based approach to regulation. Among comments expressed to researchers, the concern was expressed that OFR would favour larger practices and alternative business structures.

A little over half (52%) of firms surveyed felt the SRA “had not made it clear” how OFR would work in practice. A similar number (53%) were concerned that OFR “would leave firms open to retrospective regulation”.

One in five firms reported they had done nothing to prepare for the shift to OFR.

In other findings, nearly half (46%) of firms with trainees said the benefits of taking them on outweighed the costs, while overall satisfaction with the firms’ relationship with the SRA performance was assessed at 5.9 on a scale of 1 to 10, up marginally on 2009.

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    Readers Comments

  • Hmmm. Interesting.

    Did the survey ask how transparent the costs of TLSs representative functions were, I wonder?

    What strikes me is only a minority (albeit sizeable) thought SRA cost excessive and, even more surprisingly, a majority (albeit slim) felt OFR was a positive thing.


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