Some UK Law Firms Face Enforced Bank Rescue

Some UK Law Firms Face Enforced Bank Rescue
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But in New Zealand the banks see nothing untoward affecting the financial health of law firms

Major UK law firms are among those being treated in financial “intensive care” as a result of the financial crisis, although there are no such signs of major difficulties among New Zealand practices.

Reports from the UK show that banks are emerging as key players in the reshaping of the legal market with around 500 firms having been referred for special attention by their banks due to financial difficulties, including 21 of the largest 150 law firms being handled by Barclays Bank.

The Lawyer reported that HSBC head of professional propositions Piyali Williams said the legal -profession will see its banks taking a more interventionist stance and advising on an increasing number of consolidations. It is likely that demergers will also occur for some firms.

“Merging is not an end in itself. Putting two firms together alone isn’t enough as there needs to be a cultural fit, otherwise they’ll still collapse, so firms need to continue to take advice from their bank.”

Williams confirmed that her bank had seen a marked increase in the amount of financial restructuring advice it was giving to its law firm clients due to the economic climate.

“Concerned firms are coming to us, but we closely watch firms’working capital, and if there’s the potential of any defaults we’ll get involved,” said Williams. “We’d bring in external consultants to assess things like how the firm is operating its work-in-progress, whether it should be outsourcing work, cutting costs in some areas or whether there’s a need to divest.”

The New Zealand situation does not appear to be anywhere near as dire as the British position with the banks seeing nothing untoward so far as law firms’ financial position is concerned, although some believe the new bank deposit guarantee scheme could impact upon firms.

"We're not seeing the slowdown in the local economy forcing significant structural change in the professional service sector currently,” said John Hastings, national managing partner of business banking for the BNZ.

“Depending on the length and extent of the downturn some firms may well need to review their business plans and operations. We always encourage any business customer who may be having difficulty with managing costs or cashflow to speak to us as soon as possible. That way we can help find a solution that best suits their business."

ENDS

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