UK law firms access more than half a billion in emergency Covid loans
Government-backed funding schemes support legal industry to the tune of £694m
UK law firms have pocketed almost £700m in emergency government loans to help them through the coronavirus pandemic, according to a study by Hazlewoods, a chartered accountants and business advisory firm that specialises in the legal industry.
Law firms borrowed £515m in CBILS (coronavirus business interruption loans) and £179m in BBLS (bounce back loans), with the government-backed schemes providing 6,561 loans in total in the first 12 months since the lending programmes were introduced. The average size of a CBILS loan was £319,000, while a BBLS loan averaged £36,000 – companies can borrow up to £5m in CBILS and up to £50,000 in BBLS.
Hazlewoods says many firms took out the loans as a precautionary measure, anticipating a greater economic downturn than transpired. The majority of the loans were taken out in May and June of last year, with another
Jon Cartwright, a partner at Hazlewoods, said: “The legal profession has weathered the storm far better than expected at the start of the Covid-19 crisis. The backstop funding from the government provided much reassurance, albeit many firms have ended up not spending much or any of it.”
Some practice areas even saw an uptick in activity during the pandemic. Those included residential property, which was boosted by the Stamp Duty Land Tax holiday, and private client work, which saw an increase in wills and trusts matters.
Others, however, saw workloads drop off, with commercial property in particular slowing down.
Hazlewoods says those firms with practice areas that were harder hit by the pandemic were more likely to use government-backed loans to boost liquidity during lockdowns, while a number of firms also benefited from VAT deferrals and rent holidays or reductions.
Cartwright said: “The option to borrow money easily and defer costs such as tax bills has given law firms a temporary respite, but they will of course need to be paid back at some stage.”
The UK legal industry has been enjoying a bumper start to the year, with the sector’s turnover hitting a record high in March of £4.06bn, according to the Office for National Statistics. Listed UK firm DWF saw its profits surge 120% in the financial year to 30 April, while Knights said it expects its revenue to increase by at least 36% over the past year.