The UK’s top 50 law firms may have had strong business performance during the pandemic, but found themselves with a higher cost base as they enter particularly difficult economic times, according to a leading auditor in the sector.

In a video interview with Paul Hodkinson, editor of International, Giles Murphy, head of professional practices at auditing firm Evelyn Partners, explained that a comprehensive analysis of LLC accounts revealed some of the issues companies are facing.

Although less spending on things like travel and entertainment led to higher profit margins in the 12 months to April 2021, the gross margin of the top 50 UK law firms – revenue less expenses of staff – has decreased, he said.

“The pandemic has actually been, from a business perspective, very successful for law firms,” he said.

“I would be hesitant to caution that all was well during this difficult time, but I think for a lot of companies now they are in the position of having to dust off what those challenges were before the pandemic because they ‘re almost certainly still here for the business. And of course, now we are probably living in a tougher, more difficult and uncertain time with a war in Europe, rising taxes, rising interest rates and the big problems that a lot of people are facing, the rising of inflation and the impact that may well have on their staff cost base in the future.

Watch the video here:

Other topics covered include:

  • The key figures demonstrated by the LLP accounts
  • How companies were able to pay off their debts early on
  • The reduction in debit days, although still quite small, will increase the stability of companies’ cash flow
  • Carbon emissions have dropped significantly thanks to remote working

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