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1). Unpaid client invoices total a third of combined revenue at top UK law firms, research finds
Law firms have increasingly large amounts of unpaid bills sitting on their balance sheets, which is hurting their cash position, according to an analysis of the top 50 LLP accounts by Legal Week in conjunction with Smith & Williamson.
The top 50 LLP’s (excluding Slaughter and May) had £5.6 billion due from clients at the end of the last financial year, marking a 9% increase on 2016-17 despite dwindling cash reserves at law firms.
According to the data, the top 50 firms collected £17.3 billion in fees during this time, meaning that unpaid invoices amounted to almost a third of their total combined revenue.
Allen & Overy had the highest value of unpaid client bills, with £538.5 million due to the firm, where Browne Jacobson had the lowest at £19.3 million. CMS had the highest percentage change year on year, with a 91% increase in unpaid bills to £186.3 million after its three-way merger went live in September 2017. Full breakdown of the firm’s accounts are available here.
U.K. firms have traditionally been slower to chase payments than U.S. firms operating in the City, with clients taking on average 121 days to pay U.K. top 50 firms last year. Of this, Travers Smith were the fastest to turn around bills with an average turnaround time of 73 days last year, where Irwin Mitchell were the slowest, with clients taking on average 268.8 days to pay their bills.
Combined, the top 50 firms had £1.325 billion in cash on their balance sheets at the year-end, alongside bank loans and overdrafts totalling £875 million, leaving them with about £450 million in net cash.
However, monthly staff costs came in at £610 million, meaning that firms are relatively thinly capitalised and vulnerable to volatile market conditions – something that faster client bill payments could help to offset.
Nick Randall, associate director at Smith & Williamson, said: “Law firms are and have always been notoriously bad at their lock-up cycle, which is fairly obvious as seen by measuring the balance sheet against the turnover at these firms.
“If clients were to stop paying the law firms for a couple of weeks or a month because there were shocks to the economy, and because firms may hold onto their cash and not pay suppliers, some of these law firms could face significant cashflow problems because it’s all wrapped up in things that clients could withhold.”
However, head of professional services Giles Murphy continued to add that, based on the analysis, if firms were able to reduce their outstanding bills by just 10% by the year-end, that would more than double their net cash positions.
2). Movers & Shakers
Maria Varsellona to become group General Counsel at ABB, a Switzerland-based robotics and technology company
Eversheds Sutherland has appointed longstanding partner Helen Thomas to the new position of European Managing partner
The long-serving EMEA general counsel at the Bank of America Merrill Lynch Sajid Hussein has stepped down after 14 years to join Big Four accounting firm EY.
Belfast infrastructure partner Adrian Eakin moves to Riyadh for a new role at the Kingdom of Saudi Arabia National Centre for Privatisation
Real estate partner John Danahy is to leave Squire’s London office for King & Wood Mallesons
U.S. firm Goodwin Procter has hired a heavyweight four-partner team from Taylor Wessing, led by international corporate co-head David Mardle. Three additional partners – Malcolm Bates, Tim Worden, and Adrian Rainey – are due to join upon completing their notice periods.
Roberto Egori joins Linklaters to lead its Milan based tax practice
Former partner Jennifer Hill and former counsel Sean Houthuysen have left the firm, leaving the Magic Circle firm’s Perth office with two partners
Catherine Gibaud QC, the only female silk at 3 Verulam Buildings, is leaving to join Allen & Overy Consulting on a part-time basis
A team led by tax partner Leszek Tokarski, including tax specialists Maciej Kostrzewski and Artur Ciechomski, and several associates joined the US firm’s Warsaw office early this month.
Private equity funds lawyers John Daghlian and Mary Lavelle set to join US rival Akin Gump Strauss Hauer & Feld
Mergers & Alliances
Inclusion & Diversity
Innovation & Technology