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Stricter bank lending policies will mean up to 15% of the UK’s 9,000 law firms could go out of business, BDO Stoy Hayward predicts.
The accountancy firm says that an expected tightening in lending strategy, combined with the expected effects of the Legal Services Bill and Lord Carter’s legal aid reforms, will force the firms to merge or go into insolvency.
David Miles, a partner at the firm, says: “Historically banks have been very keen to lend to law firms and as a result they were insulated from the commercial pressures that the banking, accountancy and other service sectors have had to face.
“While banks are still keen to lend to the right firms, they now realise they need to be more discerning in their lending
decisions. As a result, we believe at least 1,500 law firms will need to merge or be wound up over the next few years.”
Miles adds that there is a widely held belief in the legal
industry that only small firms with three to four partners are at risk. “This is because in the past they have not needed to have a
sophisticated practice management process in place,” he says. “However, we would urge medium and larger partnerships not to be complacent.”
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