Keystone CEO James Knight

The leader of AIM-listed firm Keystone Law has criticised companies and law firms using the U.K. government's COVID-19 furlough scheme to "maximise profits", as the firm announces a more than 16% rise in revenues, £4 million in cash, and zero debts. 

The firm's CEO James Knight said that the government scheme is "designed for cash-strapped businesses", and not for firms to "protect their own profits", suggesting that for certain firms not in need it is "not defensible to take that government money".

As the COVID-19 crisis took hold, the government last month announced a furlough scheme, whereby businesses across the country could apply for loans that would cover up to 80% of the salaries of furloughed staff—since increased to 100% for some small and medium sized enterprises. 

Keystone has declined to use the scheme "notwithstanding the fact that the firm has eligible and relevant employees", the firm said in a statement. The firm is, according to Knight, "in a good position to weather the storm", having seen revenues rise in the financial year to January 31, 2020, by 16.3% to £49.6 million, as profits before tax grew by £700,000 to £5.8 million. 

Knight says the firm was helped late last year by a "Boris bump" following Boris Johnson's majority victory in the general election. According to Knight, the firm's "strong" cash and zero-debt position mean that it can avoid the government's emergency compensation scheme. But he has criticised law firms that have turned to the scheme simply to maintain profitability. 

"It's a terrifying time for many companies," he says. "We are in an incredibly fortunate position as a result of the money we have in account and being debt free. Our business model is suited to this environment, due to our dispersed working structure. 

"The furlough loan scheme is an excellent idea for companies that are cash-strapped that need to stay in operation. But to to take it to protect your own profits, we thought it was inappropriate. Many law firms are doing it, and it is not defensible to take that government money. The ethics of a business becomes an important factor. Rather than just take what's on offer, it's an opportunity to do as they believe; to act in a way that accords with their own ethical beliefs, rather than maximise and protect profits." 

A number of law firms have turned to the government loan scheme, including Eversheds Sutherland, Clyde & Co, Pinsent Masons and others, while those opting against using it include Travers Smith. 

As of Tuesday morning, Keystone's share price hovers around 429p.