UK law firms borrow more as clients fail to pay up on time

Data from accountancy firm Lubbock Fine found that the debt has rise by £177 million in the past year, City A.M. reports.

The data come from annual reports filed in the year to 30 November 2023.

Mark Turner, partner at Lubbock Fine, said law firms have seen an increase in lock-up days.

The average lock-up time for the top 100 firms in the UK reached 124 days last year, an increase from 122 days in the previous year.

Mr Turner said that “law firms are having to borrow more to make sure that doesn’t impact other areas like partner pay and investment in expansion”.

“Managing down lock-up days is a core focus for law firm management at present – it’s a problem that always rears its head during an economic slowdown. It also has knock-on effects that need to be managed. For example banks are often less keen to extend overdrafts to firms struggling with debts older than 90 days,” he added.

He also pointed out that office moves have led to increased spending, saying “the move towards flexible working has seen an increase in law firms moving to smaller premises”.

There are, he said, “two significant new costs” with an office move, which are “fitting out new offices and often an ‘overlap’ period where the firm is paying rent on both their new and old offices”.