Small law firms fear collapse as Covid-19 drains work

Davis: Many firms are struggling

Nearly three-quarters of small law firms believe they may have to close their doors in the next six months as result of the coronavirus crisis, Law Society research has found.

It comes on the back of Bar Council research showing that many chambers and individual barristers are struggling to stay afloat in the current situation

Some 774 small firms – defined as four partners or fewer – responded to the Law Society and 71% said they could be six months or less away from going out of business as work drains away.

Some aspects of government support schemes exclude solicitors in whole or part, such as business rate relief and self-employment support.

Law Society president Simon Davis said small firms were often at the heart of their communities and it was “vital they survive the crisis to play a role in getting the economy back on its feet”.

He said: “The shock to the legal services sector has been sudden and severe. There are widespread concerns over liquidity as firms face a dramatic plunge in income with work falling away.

“Although a firm may be open for business, this does not mean it is business as usual.”

Though government support would provide some relief, “there is a growing fear that many businesses will fall through the cracks”.

Law firms were still expected to pay business rates, he complained, “whilst their buildings stand empty and their work has dropped off”.

Mr Davis continued: “The exclusion of many solicitors from support for the self-employed mean that many are struggling. Someone who has earned £51,000 profit in the preceding year is not guaranteed to do so again and is unlikely to have built up the savings to survive for a protracted period without income.

“Crucially, there must be also be support package in place for those legal practitioners who are paid via dividends.

“Under the current schemes such people will only be able to receive a minimal amount of support, possibly no more than £575 per month. This could be solved by extending support to sole practitioners operating via a professional service company.”

The Law Society has yet to announce whether it will be taking any measures to support solicitors financially. Earlier this week, its Scottish counterpart unveiled significant reductions to the cost of practising to help its members.

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