The Law Society’s latest financial accounts show that the cost of dealing with an increasing number of firms in financial difficulty doubled from £3m to £6m, in a year that saw the body enter the black for the first time since 2010 and soon-to-retire Law Society chief executive Des Hudson receive a pay rise of nearly 20%.
The provision for intervention, disciplinary proceedings and litigation costs in the year to October 2013 increased by £3m due to ‘a significant increase in the number of legal firms experiencing financial difficulties and [the fact that] an increased part of the SRA’s supervisory activity was focussed on addressing the risks arising from this increase,’ the Law Society said.
Referring to the spread of these difficulties into higher value law firms it added: ‘The market has seen a greater number of medium and large firms move into administration and insolvency and the SRA’s primary objective has been to protect the consumers of legal services from the consequences of firm failures.’
The return to the black meanwhile, comes after two years of addressing the defined pension benefit scheme (DPBS) (which as of 6 September 2013 had no further assets or liabilities); investing in a major IT programme; and relocating Midlands-based staff to The Cube in Birmingham.
In 2013, an increase in practising certificate fees coupled with an exceptional gain from the finalisation of the DBPS plus ‘various cost reduction initiatives’ resulted in the Society re-entering the black.
Meanwhile, Hudson’s pay increased by 19% to £404,500 from 2012 when he received £340,000, which represented a 10% pay reduction on the £376,000 he was paid in 2011.
A Law Society spokesman said: ‘The basic salary increased in line with other executive level salaries at the Society. The figure quoted is higher because it includes other payments such as retention and performance-related bonuses.’
In March, Hudson announced he would retire in July after the Society’s annual general meeting, following a period of criticism of the Law Society’s handling of the Ministry of Justice’s cuts to legal aid.
The now departed Solicitors Regulations Authority (SRA) chief Antony Townsend had a more modest 5.6% rise, and was paid £198,000 in the first 10 months of 2013, with an additional £22,000 in pension contributions.
The accounts also show that the SRA reduced its headcount in 2013 from 543 to 519, however the representative arm of the Law Society increased its staff numbers by 20% from 230 to 274.
A Law Society spokesperson said: ‘The increase was in the commercial and membership services side of the Law Society. It reflects our renewed support for our members by providing services that are relevant and help them better serve their clients.
sarah.downey@legalease.co.uk