During the course of the Covid-19 pandemic law firms have borrowed nearly £700m via the government’s various Covid-19 support schemes.
Research conducted by Hazlewoods, a firm of chartered accountants within our HLB International group showed that UK law firms borrowed £694m through emergency loan schemes within the first 12 months of their introduction. The amounts borrowed in each scheme were roughly split:
- £515m from the Coronavirus Business Interruption Loan Scheme (average loan worth ~£319,000)
- £179m from the Bounce Back Loan Scheme (average loan worth ~£36,000)
Most of the loan applications were made in May and June of 2020 with a minor spike in the autumn, perhaps unsurprising when you consider that this is when many firms renew their professional indemnity insurance with the market being particularly volatile over the past 18 months.
Although many law firms did borrow relatively large sums of money during the course of the pandemic a surprisingly small number actually needed to make full use of the borrowings. Generally speaking, law firms were able to respond quickly to any potential disruption caused by the pandemic and successfully adopted remote working. This meant that, from an economic viewpoint, the legal sector performed far better than initially expected. Whilst the government-backed loans and deferring costs such as various tax payments have given many law firms reassurance and have assisted with cash flow, not many have actually needed to make substantial use of it.
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