PRESSURE: smaller practices facing tough times ahead as consultant alleges 'dire situation'


High street firms are facing a tough time with a significant number forced to shed staff and close offices as banks begin to call in loans, the Gazette learned this week.



Industry consultants warned that a drop in fee income levels is putting significant pressure on some firms.



The Gazette has learned of one unnamed London practice letting go of nine of its 13-strong conveyancing team and another closing two of its four offices. An East Anglian firm, which declined to talk to the Gazette, is understood to have reduced its opening hours to four days a week, while elsewhere firms are implementing strict cost-saving measures.



Viv Williams, managing partner of the 2020 Lawyer Group, said: 'Banks are looking very carefully at unsecured loans and putting pressure on firms to get their houses in order. There has been gross over-valuation of law firms and some lenders are over-exposed. They want their money back.'



Williams added that smaller firms were likely to be swallowed up by stronger regional practices. He said: 'We know of one high street firm which ran out of money and is now desperately trying to merge with another. We also know of a successful sole practitioner [in general practice] who, after 30 years, found he had no goodwill left in the practice. He has offered to give his firm to anyone who will merge with him and all he wants is a one-year consultancy in return.'



Pambos Patsalides, associate director of assurance and business services at accountants Smith & Williamson, said his research had turned up some 'dire situations' among law firms. He added that mixed practices were better placed to survive the current economic climate than '"pile 'em high" conveyancers'.



Exeter-based management consultant Joe Reevy added that 'waves of firms' in the provinces were laying off people and many practices were up for sale.



Law Society Deputy Vice-President Paul Marsh said many high street firms were 'healthy', but some would always struggle from time to time, particularly with the impact of referral fees.



Jonathan Rayner