Some top London corporate firms are expecting to double the percentage of outstanding legal fees they classify as unrecoverable, the Gazette has learned.

Data gathered from top firms’ latest accounts and industry sources suggested that firms are upping their write-off estimates to as much as 20% of outstanding fees. For the year ended 30 April 2008, this figure was between 3% and 9%.

An increasing number of complex disputes with clients over bills, and a rise in the number of clients going bust, were cited by industry sources as the main reasons for upping the write-offs – amounting in some cases to tens of millions of pounds.

It is normal practice for firms to write off a proportion of outstanding legal fees as ‘bad’ or ‘doubtful’ debt if they think they will not be able to recoup these fees in full. Worsening economic conditions are forcing these estimates upwards by at least 10%-20%, and in some cases more, latest LLP accounts reveal.

Tony Williams, principal at management consultancy Jomati and former Clifford Chance managing partner, said that unpaid bills are only part of the problem.

‘What’s also important is that there will be write-downs on firms’ work in progress, which will directly impact their income line,’ he said. ‘Say the firm was working on a big deal that collapsed, but it expected it to be revived in the future. There’s no way that deal is going to be revived in the current climate, so the work in progress will need to be written off.

‘It’s a nasty one, and a double whammy when revenues are down.’

Most firms record the value of outstanding fees in their LLP accounts, and some estimate the proportion of outstanding fees they expect to write off as bad debt.