Australian-listed Slater & Gordon (S&G), which makes 80% of its UK revenue from personal injury claims, lost half its stock market value yesterday (25 November) after the UK government announced plans to limit the number of personal injury claims.
Chancellor George Osborne revealed yesterday in his Autumn Statement government plans to curbs personal injury (PI) firms pursuing road accident claims in a bid to bring down the cost of motor insurance. The government wants to remove the right to general damages for minor injuries and increase the threshold for small claims to £5,000 to cover a greater volume of injuries in small claims court.
Yesterday shares in the ASX-listed firm dropped 54%, falling to A$0.89 in Sydney trading before recovering to close at A$0.94, a fall of 51% that day. Its shares have fallen from a high of A$7.85 in April.
S&G, which makes about 45% of its revenue in the UK, said it ‘does not expect there to be any impact on its FY16 performance, or the guidance recently confirmed at the company’s AGM, arising from the government’s announcement.’
The firm said the proposal, if implemented, would restrict the right of people injured in road traffic accidents to obtain compensation for pain and suffering in minor soft tissue injury claims, while preserving the right to claim compensation for other loss.
The Ministry of Justice (MoJ) now intends to consult on the details of the government proposal early next year, with S&G stating it will ‘participate in the foreshadowed consultation process and provide further information on the impact (if any) on its financial performance in 2017 and beyond’.
It added: ‘Whilst the announcement was unexpected, the company believes the scale and diversity of the Slater Gordon Solutions (formerly Quindell) business in the UK positions it well to deal with the potential impact of any future legislative change.’
In October the firm posted revised accounts which showed UK profit after tax of nearly £20m on revenue of £128m for the 2014/15 financial year, while its Australia operation saw a net profit of £21m on income of £145m. S&G revised the accounts after an audit of the firm’s UK Business. S&G, which in May acquired two UK law personal injury firms Walker Smith Way and Leo Abse & Cohen, has had its Quindell acquisition come under heavy scrutiny for its accounting practices.
Meanwhile the Law Society criticised the government’s personal injury reforms, saying it would respond to the consultation ‘robustly’.
President Jonathan Smithers said: ‘These proposals are not, as stated, about stopping fraudulent claims. Fraudulent claims are clearly repellent but they should be dealt with by targeting the fraudsters and not the vast majority of honest claimants who have been injured and bring genuine claims.’
sarah.downey@legalease.co.uk
Read more about how the Autumn Statement affects the legal sector here, and our guest comment on ‘Osborne’s bizarre personal injury proposals’ here.
