Fall in number of sole practitioners
Banks’ reluctance to lend to law firms is contributing to a decline in the number of sole practitioners, according to funding provider Syscap.
In March 2012, there were 3,574 single-partner firms, compared with 3,692 in the year before, and the number has decreased by 17% in the last five years. The number of law firms has increased slightly to just over 11,000 in the same period.
Philip White, CEO of Syscap, says: “Small law firms are being told by their banks that they need to merge if they want the continuing support of their lender.
“It seems that some lenders are also predicting a very pessimistic future for high-street law firms as a result of the entry of new competitors like the Co-op. While many high-street law firms could really do with investing in IT and marketing to deal with this new competition, they are going to find it a real struggle to get approval for these loans from their traditional banks.
“Most banks are very reluctant to lend money to businesses to acquire IT—which is a bit strange as IT is a real boost to productivity and in many cases can provide a competitive advantage.”
White predicted that some law firms may look to borrow to pay their semi-annual tax payments at the end of this month. Syscap recorded a 17% jump in the number of funding requests from law firms specifically to pay their 31 January tax bills this year.
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