British law firms have pocketed nearly £ 700million in emergency government loans to help them weather the coronavirus pandemic, according to a study by Hazlewoods, a specialist accountancy and business advisory firm in the legal sector.
Law firms have borrowed £ 515m in CBILS (Coronavirus Business Interruption Loans) and £ 179m in BBLS (Bounce Loans), with government-backed programs providing 6,561 loans to the total in the first 12 months since the introduction of the loan programs. The average size of a CBILS loan was £ 319,000, while a BBLS loan averaged £ 36,000 – businesses can borrow up to £ 5million in CBILS and up to 50,000 £ in BBLS.
Hazlewoods says many companies took out the emergency cash loan as a precaution, anticipating an economic downturn that was bigger than what happened. The majority of loans were taken in May and June of last year, with another
Jon Cartwright, partner at Hazlewoods, said: “The legal profession weathered the storm much better than expected at the start of the Covid-19 crisis. Supportive funding from the government was reassuring, although many companies ended up spending little or nothing. ”
Some areas of practice even saw their activity increase during the pandemic. These included residential property, which was boosted by the property tax exemption on stamp duties, and private client work, which saw an increase in wills and trust issues.
Others, on the other hand, have seen their caseloads drop, with commercial real estate in particular slowing.
Hazlewoods says companies whose practice areas were hit hardest by the pandemic were more likely to use government-guaranteed loans to boost liquidity during shutdowns, while a number of companies have also benefited VAT and vacation deferrals or rent reductions.
Cartwright said: “The ability to borrow money easily and defer costs like tax bills has given law firms a temporary respite, but they will of course need to be paid back at some point. ”
Britain’s legal industry has had an exceptional start to the year, with industry turnover reaching a record £ 4.06 billion in March, according to the Office for National Statistics. UK-listed company DWF saw profits rise 120% in the fiscal year ended April 30, while Knights said it expects revenue to grow by at least 36% during the year elapsed.