Law and accountancy firms are weighing up delaying partner profit distributions to preserve cash to ride out the coronavirus-triggered economic crash.
It is one strategy being considered among the Big Four accountancy firms and major law firms such as Linklaters and Pinsent Masons.
US law firm Reed Smith, which has a sizeable London operation, confirmed today that it was slowing cash distributions to its partnership.
“Our leadership is taking a cautious approach and has made the decision to slow partner cash distributions in the near term as a precaution,” the firm said in a statement.
Although law and accountancy firms can thrive in uncertain economic times, the dislocation caused by coronavirus poses a serious threat as clients struggle to pay bills and lucrative streams of work dry up.
One partner at a Magic Circle law firm said more than 20 M&A deals the firm was working on had been paused because of the crisis.
“Law firms do have the ability to do well in the counter-cyclical phase, there will be litigation coming out of these issues, regulatory work and investigations. But it is not good for law firms, it is not good for anybody,” a Magic Circle law firm partner said.
It is understood that no decision on partner payments has been taken by Deloitte.
A spokesperson said: “We’ve been closely monitoring and managing the covid-19 situation and continue to stay focused on supporting our people and clients and maintaining our economic resilience.”
Pinsent Masons’ senior partner Richard Foley said: “Ordinarily around this time of year, we make a quarterly distribution to our partners. Whether we will do so, and if so, in what amount will depend upon how events unfold over the coming days and weeks.”
The legal recruitment market has also dried up with firms such as Linklaters and Slaughter and May pausing all but essential hiring.
One legal recruiter said the crisis had put an end to the sort of big money moves seen in the market over the last few years.
“People are not going to be paying out big money now, they are probably drawing up plans to fire partners,” they said.