Magic circle firm Allen & Overy has denied reports that it will save over £150m by scaling back its premises – but says its need for office space will ‘reduce considerably’ over the next few years.
Press reports today said the practice is in line to save £155.3m if it terminates certain lease contracts early. The reports are based on Allen & Overy’s annual accounts for the year ended 30 April 2020, which say future cash flows of £155.3m have not been included in their lease liability because ‘it is not reasonably certain that the leases will be extended (or not terminated)’.
The firm’s total lease liability at the end of April 2020 had risen to £559.3m and the total cash outflow for all leases in the year ended 30 April 2020 was £100.6m.
A spokesperson for Allen & Overy said that under new financial reporting standards ‘we have to report on how we are accounting for the leases which we can terminate early in all our offices. The amount reported is the value of the leases we do not expect to pay for and is, therefore, a purely hypothetical amount which has no impact on our income, cash flow or balance sheet.
‘We need to plan ahead for our office requirements all the time and therefore we expect this value to change every year. However, while it will vary from country to country and year to year, our need for office space overall will reduce considerably over time as we transition to more agile working’.
Last week, Allen & Overy predicted that around 40% of its work will be done from home once the pandemic has passed. However, it stressed that offices will remain ‘incredibly important in terms of preserving our culture and community and in providing a space for personal development’.
Allen & Overy is the third magic circle practice to reveal its plans for post-pandemic working arrangements. Freshfield Bruckhaus Deringer has announced a new 'agile working' policy that will allow UK staff to work remotely up to 50% of the time.
Meanwhile, Linklaters said last year that employees across the world will be able to work remotely between 20-50% of the time, as long as teams are told in advance and operational roles are fulfilled.