Law Firms Collapse May Affect Future Funding

Tue, 27 Jul 2010

The collapse of Manchester based law firm Halliwells could have significant ramifications for the UK legal industry, according to the administrator in charge of handling the demise of Halliwells. BDO business restructuring partner Dermot Power was appointed on Tuesday prior to the break up of Halliwells’ operations, and Power predicts that Halliwells’ collapse could have implications for the availability of credit to LLPs in the future.

With bank debts of £22 million, and further sums owed to creditors, Halliwells’ plight is sure to have alerted banks to the fallibility of the legal sector. Power voiced his expectation that lenders may now review their lending criteria for loans to LLPs, potentially making it harder for law firms to secure credit in future.

Since the break up of Halliwells’ operations, more than 620 of the legal firms 700 employees have been axed, with further redundancies expected upon completion of ongoing operations. Many of the unfortunate employees are support staff, though lawyers and solicitors have also been affected.

Despite the collapse of Halliwells, few are predicting a similar plight for rival law firms . Often described as a robust industry, the legal sector has coped relatively well with the economic downturn.
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