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Slater & Gordon’s stock price plummets by over 50% as George Osborne aims to end compensation culture

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This may be why few law firms are listed on the stock market

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Slater & Gordon has moved to reassure investors after George Osborne’s proposals to clamp down on personal injury claims caused the firm’s share price to plummet by over 50%.

The firm — that first floated on the Australian stock exchange back in 2007 — saw its share price spiral downwards to less than A$1 (48p) from a A$6 (£2.87) summer high, as Osborne gave his autumn statement at Westminster yesterday.

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The Chancellor of the Exchequer proposed a ban on general damages for minor injuries — such as whiplash — and suggested a new small claims limit of £5,000 on all personal injury matters.

Osborne hopes that the reduction in claims will have a positive impact on the insurance sector. Trumpeting his idea in the House of Commons yesterday, Osborne claimed that insurers would be able to reduce premiums, allowing firms to pass on the savings to customers.

This is evidently of major concern to Australia-headquartered Slater & Gordon, around 75% of whose work is personal injury-related, according to legal directory Chambers & Partners. Indeed, so anxious was the firm — which offers training contracts and legal apprenticeships across its network of UK offices on a rolling basis — that it moved to reassure investors that it was business as usual.

In a statement released by the firm, it told shareholders that it didn’t foresee any financial impact in the year ending 2016. Insisting that Slater & Gordon had more strings to its bow than just personal injury, the firm said:

Whilst the government’s announcement was unexpected, the company believes that the scale and diversity of the Slater Gordon Solutions (SGS) business in the UK positions it well to deal with the potential impact of any future legislative change.

However, the firm — which is famous for its TV adverts — did harbour concerns that the government’s proposals “would impact on the rights of people injured in road traffic accidents”. The Law Society has echoed this worry, speaking of its “grave concerns” that these proposals “will completely undermine the right of ordinary citizens to receive full and proper compensation from those that have injured them through negligence”.

It’s yet another headache for S&G, which has seen its share price steadily decline since it purchased the legal services arm of law and insurance hybrid Quindell for £637 million earlier this year. The Financial Conduct Authority (FCO) launched an investigation into Quindell’s financial past earlier this summer and despite it being quickly discontinued, the Aussie firm’s share price still suffered as a result.

There seems to be real concern for S&G’s future. Earlier today, Australian news site ABC ran with the headline, “Is one of Australia’s oldest and most famous law firms — and the first in the world to list on a stock exchange — going broke?” Claiming that the firm’s problems run deep, citing debt and borrowing, the article suggests “the bankers might be pouring over the books now.”

Earlier this year, Anglo-Scottish corporate law firm Gateley took advantage of the Legal Services Act 2007 to become the first UK-based firm list on the London Stock Exchange. With Slater & Gordon having to desperately reassure shareholders that everything is OK, Gateley’s management will no doubt be watching closely to see how a listed law firm deals with a crisis.

11 Comments

Anonymous

Massive jump from £1k to £5k.

Don’t forget the defendant lawyers need the claimant lawyers to keep their jobs too.

(6)(1)

Anonymous

its not just the jump to 5k its the end of whiplash as an actionable tort. if generals goes to 5k then special damages, will likely, will go to 25k.

(2)(0)

Toiler

An utterly miserable PI sweatshop, evade this firm like the plague.

Several of my mates from Aussie law schools said they’re affectionately known as ‘career kryptonite’ in Sydney and Melbourne.

(5)(0)

laird lyle of the Isles

I concurr with Toiler. These small claim ambulance chasers are the primordial slime of the legal world. I had the misfortune of having a job interview with one of these firms. I terminated the interview opining that the firm was not a legal firm in my opinion.

(4)(5)

Sorry to point out the obvious

Who actually thinks that the insurance industry will pass on the £40-£50 saving to consumers in the few years it takes the new law (whatever form it takes) to be implemented and then have an effect? It won’t. Its a political gimick that won’t even solve the problems that do exist in the personal injury sector.

The motor insurance industry is also its own worst enemy; more often than not they are wholly to blame for cases going as far as they do and pushing up costs when they don’t have a leg to stand on. Its a pain in the neck standing up and saying to a judge ‘I’m instructed to say the injury isn’t proven/isn’t what the medical expert says it is/is worth half what the guidelines say it is’ with no basis for doing so.

Changes are needed, these changes are not them.

(7)(0)

Not Amused

The insurance industry does seem to have a disproportionate ability to influence government, the opposition (Jack Straw) and the Judiciary (Rupert Jackson).

These changes appear to be justified on the basis that they will prevent fraud. But we prevent fraud in other areas successfully without simply shutting them down. We don’t fight burglary by having everyone remain indoors.

This is yet more unjustified intervention on our litigation industry. That hurts jobs and graduate prospects.

(4)(0)

Anonymous

“Pouring over the books”?

Really, ABC News?

(2)(0)

Crinimal Barrister

Got out of PI early to do Legal Aid crime. No regrets whatsoever.

Many people suffer catastrophic injuries/illnesses every day without any help or compensation.

The idea that a few grand will make up for a bit of back pain just costs us all far too much. Hopefully our insurance premiums will go down as a result.

(3)(4)

PI Escapee...

Years ago used to do lots of fairly routine PI – god, it was soooooooo boring.

No law involved at all.

And it always amused me how ‘precious’ PI lawyers get about drawing up interminable Schedules of Loss – getting the latest replacement battery for the kitchen appliance needed down to the last penny…when conceding reductions for Causation or Con Neg in very broad % figures that then made a mockery of their anal schedules…

(9)(2)

Anonymous

I couldn’t agree more. PI is dull, its practitioners are appalling (12KBW anyone?).

(4)(0)

Defender of the Truth

The UK arm of this firm, especially legacy firm RJW are consummate liars and suddenly the Australians are beginning to realise what they got themselves in to. Greed has a price. Let them pay it. As for removing peoples’ rights to claim soft tissue damage….. Can you hear how pathetic that sounds. Grow up and look at the figures for it in Europe (not the USA.) Thank God we are staying European. Now dump the greedy liars; they’ve fine nothing but ruin the profession’s reputation.

(0)(0)

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