UK firms increase borrowing, rather than asking partners to pitch in
Top UK law firms have increased borrowing by 40 per cent in response to the financial crisis, according to an article published in Times Online today. comments powered by Disqus
The legal services sector has traditionally had less capital than other businesses of similar size, because profits are withdrawn annually for distribution to equity partners. Many firms have sought out additional funding to cope with the financial crisis, and there is a clear trend toward borrowing from financial institutions, rather than asking partners to commit funds.
According to information published by accounting firm Grant Thornton, the debts of the 40 biggest UK legal practices (whose accounts have been made publicly available) rose to £591 million in 2008-09, up from £425 million in 2007-08.
Peter Gamson, head of the professional practices group at Grant Thornton, warned that this borrowing pattern may harm firms in the longer term by inhibiting growth and deterring investors when the UK legal services industry opens up to outside investment next year.
Firms with the most debt:
- Clifford Chance £96.8m
- DLA Piper £87.9m
- Herbert Smith £75m
- Halliwells £27.1m
- Bird & Bird £23.7m
- Berwin Leighton Paisner £23.7m
- Eversheds £23.3m
- Allen & Overy
- Burges Salmon
- Dundas & Wilson