UK Legal Industry Turnover Growth Plummeted to Four-Year Low in Q1
The Office of National Statistics figures include the last few weeks of March when COVID-19 began to impact the economy.
May 13, 2020 at 08:48 AM
2 minute read
London
Total revenue growth for the U.K. legal industry dropped to its lowest quarterly figure in four years during the first three months of 2020, according to new research.
The rate of combined turnover growth fell by 6.6% to £9.34 billion between Q4 2019 and Q1 2020, according to figures from the Office of National Statistics compiled by litigation funder Augusta Ventures. Its previous lowest point was in 2016 Q1 when it dropped 6.9% to £7.83 billion.
The statistics cover the final weeks of March, when the COVID-19 pandemic caused the U.K. to go into lockdown and began to impact the economy.
For the overall U.K services industries combined, turnover growth for the first quarter of 2020 was £53.5 billion, down 7.6% compared to the last three months of 2019, when both the legal and services industries had reached record highs.
Augusta recently published a report based on law firm LLP filings which found that 55% of 40 of the U.K. top law firms had insufficient cash on their balance sheet to cover one month's bills even before the coronavirus pandemic hit, while 38% could not even pay one month worth of staff salaries from its cash reserves.
"The legal industry in the U.K. had already started to see growth fall off before the pandemic hit," said Louis Young, managing director at Augusta, in a statement.
"U.K. law firms have seen significant revenue falls since lockdown began, Q2 will unfortunately be well below past quarters. Many firms are seeking support for their businesses – the provision of finance from external sources will be incredibly important to their survival as time progresses."
Research by accountancy firm Smith & Williamson recently found that the majority of the top 50 U.K. law firms had bank loans and overdrafts that outsized their cash positions during the last financial year, with only 12 firms operating with no debt at all.
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