10,080 firms currently registered – down just 2% on last year
The number of law firms in the UK has held up well despite the lockdown with 10,080 firms registered as of December 2020, down just 2% on the 10,278 firms that were registered in December 2019.
The fall in number of firms is only slightly greater than in previous years as the gradual consolidation of the profession continues.
Although many law firms have seen a drop in income over the last year due to lockdown, costs have also fallen, resulting in few firms having to close. The lockdown and the huge shift to home working that almost all law firms have followed has allowed firms to significantly reduce their operating costs.
Law firms have also been able to defer tax and VAT payments during the pandemic, while some have also been able to negotiate rent holidays with their landlords. Some firms have also switched to paying rent on a monthly rather than a quarterly basis in order to alleviate cash flow issues.
A further reason the number of law firms has remained relatively stable is that only a small number of firms failed to gain professional indemnity insurance during the October renewal season. It had been feared that the number of firms unable to find cover would rise sharply. However, most firms were able to afford increased PII premiums, with some funding them through the Government’s CBILS loan scheme.
Whilst some areas of law firm practices have been quieter during lockdown, such as commercial property and M&A work, other areas of law have been remarkably busy and buoyant. In particular, law firms’ residential property offerings have rarely been busier, allowing some firms to make up lost ground from other, quieter practice areas.
Andy Harris, Partner, comments: “There were fears that the effects of the pandemic could drive an increasing number of law firms to close – thankfully that hasn’t been the case and the legal profession has weathered the storm well.”
“The Government’s moves to delay tax and VAT bills and introduce the CBILS scheme have been vitally important to law firms, particularly those that have seen their professional indemnity insurance premiums jump. Being able to borrow at relatively low rates to pay those premiums has given a lot of firms some extra breathing room.”
“The Stamp Duty holiday has also been a great help to a lot of small and mid-sized firms. Residential property work has boomed in recent months and for some firms, that is making up for a drop-off in other areas.”
“It will be interesting to see what happens when the Stamp Duty holiday ends and firms have to start repaying their deferred liabilities. We could see increased activity in M&A activities.”
Number of law firms each year since 2014