The U.K.'s top 50 law firms have worryingly little cash on their balance sheets, according to a comprehensive analysis of limited liability partnership accounts by audit firm Smith & Williamson.

The top 50 had a combined amount of £1.325 billion of cash on their balance sheets in the accounts, and combined bank loans and overdrafts of £875 million, which leaves them with net cash of £450m.

That figure is significantly less than their combined monthly wage bill of £610 million and the gap between net cash and monthly wage bill has grown on last year.

In a videoed interview with Legal Week editor-in-chief Paul Hodkinson, Giles Murphy, head of professional practices at accountancy firm Smith & Williamson, said: "It does demonstrate how thinly capitalised law firms are and how heavily reliant they are on the clients to keep on paying those debts and actually cash coming in." He added: "We do have some concerns about the future viability of some of these firms."

With Brexit in mind, he said: "I would suggest that this is a time when firms should actually be protecting themselves, becoming more resilient, on the assumption that the future path is likely to become more volatile."

Other topics discussed include:

• How law firms have halted the long-running decline in profit margin
• How increasing revenues are largely being offset by increasing staff costs
• The tension between holding cash back and putting capital to use
• The large amounts of unpaid bills and how firms compare with other sectors in managing debtors
• How well prepared firms are for poorer economic conditions and Brexit's impact

This is the first in a series of articles analysing the 2017-18 LLP accounts of the UK top 50, in association with Smith & Williamson. Other subjects under the microscope will include profit margin, debt and lock-up and other liabilities.