Law firms throughout the West Midlands are being put at risk by a dramatic slowdown in deals, a business expert has warned.
Nigel Reynolds, senior partner at accountancy firm Reynolds and Company, based at Birmingham International Park, sounded the alert days after Halesowen-based law firm Stables and Co was closed by the Solicitors Regulation Authority.
He said the ongoing decline of deals had hit smaller firms with little, if any, conveyancing available to provide ‘bread and butter’ income.
Mr Reynolds said: “I believe that there will be a lot more cases like Stables and Co for small firms as well as some high profile firms.
“The larger firms appear to be experiencing less mergers and acquisition deals, corporate restructuring and flotations which many of them relied upon, and now with HMRC attacking Tax Avoidance Schemes, many firms are moving out of those activities claiming there is no money in it. But perhaps it is because it is now too high a risk for them?”
RSM Tenon, accountants, have announced that they are no longer going to be involved in Tax Avoidance products because it is not cost effective while fears grow that one of the large accountancy firms could close due to over-capacity in the market.
“What we are seeing now is I believe only the tip of the iceberg and over the next 12 months a lot of professional firms could be seriously impacted by both the ongoing slowdown as well as the Banks having to tidy up their Balance Sheets in order to meet the requirements of Basel III which requires them to have much stronger balance sheets than they have now; they must do this by 2015 which is not a lot of time.
“One of the effects of this is that there is going to be less credit available to businesses in general and especially small and medium sized businesses, which are always perceived as being higher risk.
“It will be interesting to see how the Government reacts to all of this since I believe it will be difficult for them to kick start the economy until the Banks have sorted themselves out.
“The only possibility is if the alternative lenders can increase their activity and take up the slack, which, if they do, will also impact upon the long term profitability of the Banks, where since the Second World War they have relied on business borrowing to provide a lot of ‘bread and butter’ income.”
Stables and Co, at 70 High Street, in Halesowen, have been closed with immediate effect.