Just 29 UK law firms closed last year due to financial difficulties – less than 0.5% of total
More law firms have stronger financial foundation
There were just 29 law firm closures in the UK due to financial difficulties in the last year*. The number of firms closing due to financial difficulties represented just 0.3% of the approximately 10,380 law firms in the UK**.
The low number of law firms closing due to financial difficulties demonstrates the resilience of the legal profession, despite ongoing uncertainties around Brexit.
Many law firms are well-insulated from the recent political uncertainty as Brexit has led to an increase in work across several practice areas, such as financial services regulatory trade and restructuring. A recent report from the Law Society has suggested the turnover of UK legal services businesses will rise by 7% between 2018 and 2021.
While the legal profession overall is performing well, some smaller high-street firms are still contending with the impact of past legislative changes, including cuts to legal aid and the Jackson Reforms. Government spending on legal aid was cut to £1.6 billion in 2016/17, down 26% from £2.6 billion in 2011/12.
Many UK law firms are doing remarkably well considering the political turmoil of the past couple of years.
Much of the wider business landscape has been adversely affected to some extent by Brexit. However, law firms across the country – not just magic and silver circle law firms – seem to be performing well.
That’s not to say that law firms are without any pressure. However, firms must not become complacent. As we have seen, changes to legislation, for example around personal injury cases, can have a potentially serious impact.
In recent years, many law firms have looked to place themselves on a more solid financial footing by trimming overheads. Firms also need to make sure they either have a diverse range of work to ensure their revenue streams are not impacted or really become a true specialist in one area. It can be easy to slip into financial difficulties if you take your eye off the ball.