The U.K.’s top 50 law firms may have had a strong trading performance through the pandemic but they have been left with a higher cost base as they enter a particularly challenging economic period, according to a leading industry auditor.
In a videoed interview with Law.com International editor-in-chief Paul Hodkinson, Giles Murphy, head of professional practices at audit firm Evelyn Partners, explained that a comprehensive analysis of limited liability partnership accounts showed some of the issues facing firms.
Although less spending on things like travel and entertainment meant profit margins increased in the 12 months to April 2021, the gross margin of top 50 U.K. law firms—turnover less staff costs—decreased, he said.
“The pandemic was actually, from a trading point of view, very successful for law firms”, he said.
“I would hesitate to sort of caveat that by saying well that was all fine during that difficult period but I think think for a lot of firms they’re now in the position of having to dust down what those challenges were pre-pandemic because they’re almost certainly still there for the firm. And of course now we’re in arguably a harsher, more challenging, uncertain time with a war in Europe, rising taxes, rising interest rates and the big issues that a lot of people are dealing with, rising inflation and the impact that may well have on their staff cost base going forwards.”
Watch the video here:
Other topics discussed include:
- The headline numbers demonstrated by the LLP accounts
- How firms were able to pay back debts early on
- Reduction in debtor days, although still pretty poor, will increase firms cash stability
- Carbon emissions fell drastically, as a result of remote working