A local government alternative business structure which describes itself as one of the UK's first social enterprise law firms reported a £1.2m loss on turnover of £7.8m in 2018/19, according to its latest annual report.
LGSS Law, set up in 2015, is wholly owned by Cambridgeshire and Northamptonshire county councils, along with Central Bedfordshire Council, which became a third owner in 2016. Accounts filed by LGSS Law Ltd at Companies House show that in the year ended 31 March 2019, revenue declined from £8.7m to £7.8m. Annual losses rose from £300,000 to £1.2m.
LGSS Law's report states that the company has implemented 'new and more rigorous procedures to manage revenue and costs with a view to achieving profitability going forward'. Growth will come from developing 'higher-margin lines of business', increasing fee-earners' efficiency to handle more work and increasing headcount, the report states.
During the year the company employed four directors and 126 staff. Total remuneration was £6.2m. Directors' remuneration totalled £269,277, including £105,526 to the highest-paid director.
Under the heading 'going concern', the report says the directors 'have a reasonable expectation that the company will continue in operational existence for the foreseeable future'. However, they are 'aware of certain material uncertainties which may cause doubt on the company's ability to continue as a going concern'.
The company 'continues to be reliant on the support of its shareholders in the form of loans, overdrafts and trade payables balances. However, the shareholders have agreed to subordinate all existing loans, overdrafts and other amounts payable which, together with forecasts showing an improved position over the next 12 months, has allowed the directors to have a reasonable expectation that the company will continue in operational existence for the foreseeable future'.
Cambridgeshire provided a £499,000 overdraft facility during the year, of which £375,000 has been drawn down. In the previous year, Northamptonshire provided a £1m overdraft facility, of which £950,000 was has been drawn down. LGSS Law found itself at the centre of a political row over Northamptonshire's overdraft.
As excitement over ABSs appeared to wane, local authority lawyers heard about LGSS Law's unique business model at an annual weekend school in March 2018, when executive director Quentin Baker said it was the first 'social enterprise law firm' in the country'. Baker quit a few weeks later. Professor Stephen Mayson, an academic specialising in legal regulation, joined LGSS Law as a director in April 2019.