Warning signs for legal eagles: One in three law firms in serious financial danger

Warning signs for legal eagles: One in three law firms in serious financial danger

January 20, 2017

Earlier this week of the UK arm of law firm, King & Wood Mallesons collapsed into Administration despite concerted efforts to find a rescuer. Now Opus has carried out research for City AM using the database and analytics of the financial health monitoring specialists, Company Watch to assess the state of the UK legal market. The legal sector is currently battling its way through a slew of reforms, which are affecting firms’ profitability and their ability to raise finance.

It found that a worrying 2056 (34%) solicitors’ practices were in the Company Watch warning area. This means that they are at serious risk of insolvency or will need a major financial restructuring at some time during the next three years.  This compares with the economy as a whole, across which around 25% of companies would be in the warning area.

Our Business Risk Advisor, Nick Hood commented:

“Of course, they won’t all collapse like KWM because they will be rescued by other firms or their owners will raise new capital to support them. But my best estimate is that around a quarter of those at risk – 500 firms – will actually fail and with all the turmoil in the legal sector, it might well be higher.”

Click below to read the City AM article


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