Research Show Debt Levels on the Rise in Top UK Law Firms
Research shows that debt levels rose significantly in 2016/17 at the many of the UK’s largest law firms.comments powered by Disqus
The Lawyer’s exclusive research reports that among 82 firms that provided debt-related data for the UK 200: Financial Management report, total borrowings last year stood at £375.8m, averaging £4.58m per firm. This indicates an increase from the previous year’s data from 88 firms, when the total borrowings were £349.2m, averaging £3.96m per firm.
In spite of the rising debt trend, several firms also reported growing cash stockpiles in recent years. When asked (for the first time, in this yearly report) to report the cash level stockpiled at year-end, a notable number of firms with borrowings also reported having cash in the bank at year-end, and even in many cases a cash surplus.
The firm with the highest cash surplus of the firms sampled by the UK 200 was Osborne Clarke with £29.8m. The firm also had borrowings of £2.3m and a net debt of £27.5m.
The firm’s managing partner Ray Berg stated, “We work very closely with the finance team, pay close attention to some key metrics, and encourage our people to speak with our clients.” Berg claims that the key to financial management was human interaction. “It’s part of the client relationship management process, a fundamental part of it. Also we simply don’t want to be indebted. We took out a small loan for fit-outs and amortised the lot, but we don’t want to be borrowing to pay drawings. That’s the start of a slippery slope.”
Berg attributed the firm’s cash surplus to the important of investment. He went on: “We also need to invest to innovate so we need cash to invest in tech, infrastructure, people, that’s what we’ve been using the money for, though we take a relatively considered approach to investment. We’re custodians for the next generation of people.”
Among the 92 firms that provided data about the cash they had in the bank at the 2016/17 year-end, the total cash was £290.5m. The total net debt was £107.1m, across the 95 firms that provided data.