The deep rot within Britain’s legal industry
The deep rot within Britain’s legal industry
Louis GossTue, May 12, 2026 at 5:30 AM UTC
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The deep rot within Britain’s legal industry Lead
On the morning of Feb 2, hundreds of staff turned up to work at PM Law to find their offices shut.
With no explanation given across any of its 11 high street branches, shocked workers soon discovered that the closure was not temporary. The firm had collapsed.
However, it was not only workers left in the dark by PM Law’s failure. Even the UK’s legal watchdog had no idea.
“We understand PM Law has closed suddenly and not in a manner we would expect,” a statement from the Solicitors Regulation Authority (SRA) read later that day.
“We expect that those affected should be soon. There is no further information we can provide at this time.”
It did not take long to find out that the firm had fallen victim to a serious fraud, as £40m had been stolen from client accounts linked to homeowners and bereaved families.
While the SRA has since taken over the firm and paid out millions of pounds in compensation, the scandal has raised questions over the watchdog’s actions. In particular, why it failed to spot the fraud before it was too late.
Scrutiny has only heightened after a string of other high-profile law firm failures in recent years, fuelled by either fraud or financial mismanagement.
Not only has this resulted in hundreds of job losses across the UK, but it has also sparked chaos for everyday households.
The fallout led to the Legal Services Board (LSB), the senior industry watchdog, staging an emergency intervention last week.
In a damning statement, it said the SRA was under scrutiny for three law firm failures, which it said was “exceptional in the history of legal services regulation”.
This includes PM Law, Axiom Ince and SSB Law.
It called for “urgent and immediate” reforms to prevent similar failures in future.
Before the PM Law scandal, the collapse of Axiom Ince in October 2023 had thrust the SRA into the spotlight.
After £60m was stolen from client accounts, the SRA was condemned by the LSB for failing to act “adequately, effectively and efficiently” to stop the multi-year fraud, which is believed to have started in 2019.
Axiom Ince itself was formed through a merger between Axiom DWFM and Ince & Co, led by Pragnesh Modhwadia, the former’s chief executive and an ex-City lawyer, which rescued Ince & Co from the brink of bankruptcy.
Watchdog failed to act
The launch of the new firm was marked with a lavish party at a nightclub in Piccadilly, where attendees were showered with fake money while mixing with fire breathers and female dancers.
Modhwadia was front and centre of the celebrations as he was captured on video drinking Dom Pérignon champagne straight from the bottle and dancing to 2Pac’s “California Love”.
However, after a short-lived acquisition spree, the firm imploded in 2023 – putting 1,400 employees out of work.
A report by the LSB later found that the SRA missed a series of red flags that could have halted the fraud at a much earlier stage.
Notably, the LSB ruled that the SRA failed to fully intervene at Axiom Ince even after it discovered that funds were first being misappropriated in July 2022.
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This oversight led to an additional £34m being taken from clients’ accounts controlled by Axiom Ince, which the LSB said could have been prevented if the SRA had acted earlier.
Five of Axiom Ince’s former directors, including Modhwadia, were subsequently charged with offences including fraud, forgery and destruction of documents. They are expected to stand trial in February 2027 and deny wrongdoing.
Separately, the SRA has faced scrutiny over its approach to SSB Law, which collapsed in January 2024.
Founded in 2018 by Jeremy Brooke, a former police officer who later became a criminal solicitor, the law firm quickly became one of Sheffield’s largest employers with 1,400 staff.
Its business model was built on filing claims on behalf of homeowners over poorly installed cavity wall insulation fittings on a no win, no fee basis.
However, spiralling debts led to the firm’s failure in early 2024.
As well as job losses, it led to thousands of clients facing unexpected legal bills as claims unravelled. In one case, a former client of SSB was pursued for costs of £74,500.
Again, this has led to criticism of the SRA, which had received more than 100 complaints about SSB Law before its collapse but had failed to act on the warnings, according to a report from the LSB.
It failed to intervene despite having enough knowledge of SSB’s financial issues, the LSB said.
The SRA apologised for its handling of SSB Law in October last year and vowed to take a more “proactive” approach.
‘Urgent reform’ needed
In all three cases, the law firms at the centre of the scandals had undergone fast-paced growth through mergers and acquisitions, fuelling concerns that the SRA had failed to acknowledge the risks associated with such legal businesses.
The LSB has now called for “urgent reform” at the SRA, claiming it is “deeply concerned” by the cumulative £100m of losses tied to the suspected frauds at PM Law and Axiom Ince.
Worryingly, it also warned there could be “further significant failures” going forwards across the legal industry.
The LSB is writing a separate report on the SRA’s handling of PM Law, which is expected to be published at the end of June.
For its part, the SRA has acknowledged it has a problem. The watchdog last week outlined plans to strengthen its investigative capabilities to help it take a more proactive approach.
The plans will see it increase fees for law firms and solicitors with the aim of raising an extra £25m in revenue and boosting its overall budget by 29pc to £111.5m in 2026-27.
The SRA employs over 750 staff at a cost of £47m, while its chief executive is paid over £400,000 a year.
The watchdog said it also plans to increase mandatory contributions to its compensation fund, which has been drained after it handed out £20m to PM Law’s former clients.
Sarah Rapson, who took over as the SRA’s chief executive in November last year, said: “We need to change how we work. We can’t meet today’s demands and achieve what is needed by doing more of the same.”
However, this will likely be little consolation for the clients and employees whose lives have been thrown into disarray by fraud, whether it be first-time buyers whose deposits were stolen or families left unable to claim their inheritance.
Katie Brown, a 38-year-old whose house sale fell through earlier this year, told the BBC in February: “I think people need reassuring that this situation can’t happen again.
“For a company as big as PM Law to disappear overnight – policies have to be re-looked at in order for this not to happen again to somebody else in the future.”
Source: “AOL Money”
