UK law firm are in strong financial position to seize opportunities and withstand Brexit uncertainty ahead, according to new figures released on the finances of British law firms. The total amount of cash the Top 100 UK law firms have in their bank accounts hit £1.4bn last year, up 12 per cent from £1.3bn the previous year, research by accountants and business advisers Hazlewoods reveals. This is 75 per cent higher than the £818m the Top 100 firms had in reserve five years ago, according to their financial statements.
Hazlewoods says the increase suggests that law firms have been careful to store up capital in the years since the recession, and now have a substantial financial cushion. Such high levels of reserves should put them in a better position to face the uncertainties posed by Brexit. The funds give them greater scope to put in contingency plans if clients move work overseas, for example financial services, or to build capacity should workloads increase as clients require more advice on the legal impacts of Brexit.
Robust bank balances would also allow for future capital investment, so firms can take advantage of growth opportunities or implement new technologies to help increase productivity. Hazlewoods says law firms may have to invest much more heavily in technology as the drive towards implementing more sophisticated systems such as artificial intelligence (AI) gathers pace. Andy Harris of Hazlewoods, says: 'Top 100 law firms are now in an increasingly strong financial position. During the last recession, some firms came in for criticism for paying out too much to partners and not retaining enough of the firm’s earnings. However, these figures suggest they have taken a conservative approach to cash preservation in recent years. After a decade of tight budgeting by clients, increasing their bank balances is a great achievement.'
He added that Brexit posed 'one of the biggest challenges to the UK economy since the Second World War, so it is reassuring to see healthy reserves in the bank for law firms to weather any potential turbulence ahead.' Mr Harris said: 'Law firms are also well-prepared to take advantage of new opportunities. Those who are weighing up expansion plans or investments in technology will be in a better position to give them the go-ahead when the time is right. Innovations such as AI and big data analytics are rapidly becoming business-critical.'