Blitz on whiplash claims batters Slater & Gordon shares
SHARES in Australia-based consumer legal group Slater & Gordon have tumbled more than 75% this week after Chancellor George Osborne announced proposals to change the legal rights of people injured in car accidents.
The law firm’s shares tumbled 51% to 94 Australian cents (45p) on Wednesday and fell sharply again on Thursday on the news.
During his Autumn Statement the Chancellor announced measures to tackle questionable whiplash claims, including removing the right to general damages for minor soft-tissue injuries from a car accident.
He also plans to cut legal costs by transferring personal injury claims of as much as £5,000 to the small claims court.
Whiplash costs the insurance industry around £2bn a year, or an average of £90 per policy, “which is out of all proportion to any genuine injury suffered,” the government said.
Osborne said the government will consult on ending the right to cash compensation for minor whiplash injuries.
Slater & Gordon said while the Government’s announcement came as a surprise, it doesn’t expect the proposals will affect its earnings in the 2016 financial year.
The company has 3,800 employees in the UK – including more than 600 in Manchester, where in the last few years it has swallowed-up firms including Russell Jones & Walker, Pannone and Fentons.
The fall in the company’s share price extended Slater & Gordon’s slide this year to 90%.
The firm said in June that it had misreported UK cash flows and was responding to queries from Australia’s market regulator over its audit process. Earlier this year it bought up the professional services arm UK insurance claims processor Quindell – which deals with motor insurance claims.
Shares in AIM-listed Lancashire-based professional services group Fairpoint slumped 10% to 168.5p on the news .
In a statement the Chorley firm which has acquired legal firms Simpson Miller and Colemans in the last two years, said: “The expected implementation timetable is April 2017 following a period of consultation in which the exact nature of the proposals will be defined.
“As such the proposed changes will have no impact on the board’s expectations of group performance for the year to 31 December 2015 or for the year to 31 December 2016.
“The notion of extending the small claims limit has been a topic of debate for some time and following the acquisition of Colemans and its class leading Legal Processing Centre in August 2015, the group has an operational capability designed specifically in anticipation of such changes. As such the group is well positioned to take advantage of these market changes.”
