Top law firms in England and Wales have 75% extra cash in reserve than they did five years ago.
According to newly-published figures, the total amount of cash held by the top 100 firms hit £1.4bn at the end of the last financial year, up 8% from £1.3bn the previous year. The 2016/17 total is 75% higher than the £818m held by firms at the end of the 2011/12 financial year.
The figures are based on data in the firms’ financial statements after partner remuneration. Any overdrafts and loans have been excluded.
Accountancy and business advisory firm Hazlewoods, which published the figures, said it was important for firms to have healthy reserves to prepare for potential turbulence caused by Brexit and changes to the legal profession, including the growing use of artificial intellegence.
Andy Harris, associate partner at Hazlewoods, said: ‘During the last recession, some firms came in for criticism for paying out too much to partners and not retaining enough of the firm’s earnings. These figures suggest they have taken a conservative approach to cash preservation in recent years.’
Harris said firms will now have greater scope to put in contingency plans if clients move work overseas, or to build their capacity if workload increases as clients require more advice on the legal impacts of Brexit.
He added: ‘Law firms are also well-prepared to take advantage of new opportunities. Those who are weighing up expansion plans or investments in technology will be in a better position to give them the go-ahead when the time is right. Innovations such as AI and big data analytics are rapidly becoming business-critical.’