Sole practitioners and freelancer solicitors at financial risk, says Society

The extension of urgent financial help for all businesses has been announced by government, but the Law Society warned that the legal sector must not fall through the cracks.

The extension of urgent financial help for all businesses has been announced by government, but the Law Society warned that the legal sector must not fall through the cracks.

Separately, the Ministry of Justice (MoJ) announced a new support package to help legal aid providers through the pandemic – but the Law Society questioned how adequate this would be.

On 3 April, Chancellor Rishi Sunak announced he was bolstering business interruption loans for small businesses.

He said the Coronavirus Business Interruption Loan Scheme (CBILS) will now support “all viable” small businesses affected by covid-19, “not just those unable to secure regular commercial financing”.

So far, more than £90m of business interruption loans were approved under the CBILS for around 1,000 firms.

“Despite the changes, there are still fears that sole practitioners or freelance solicitors may fall through the cracks”, warned Law Society President Simon Davis.

“These practitioners are particularly exposed – often with significant cashflow concerns – and their survival is key to a wide-range of the public whose concerns they look after.”

Davis said strengthening the loan scheme was “a necessary step to shore up vital parts of the economy”, but warned: “Law firms face a dramatic plunge in income as work falls away.

“There are also widespread concerns over liquidity and the ability to meet liabilities and taxes.”

“It is of crucial importance to the economy that the legal services sector can continue to function through this challenging period - to support commercial transactions, provide bespoke advice to business, and to facilitate access to justice whilst upholding the rule of law”, added Davis.

However, he said: “It is heartening that government appears to have acted upon many of our recommendations to support the legal services sector.

“Increasing the turnover threshold, removing the need for personal guarantees and the requirement to have exhausted commercial sources of credit first, are all significant steps which will be of considerable benefit.”

Meanwhile, the MoJ announced a number of measures including expanding the scope and relaxing the evidence requirements for hardship payments in Crown Court cases, such as reducing the threshold for work done to £1,000, instead of £5,000.

Hardship payments will also be easier to access; and some firms will have their debt repayments to the Legal Aid Agency (LAA) “paused”.

Davis welcomed the move, which is intended to enable practitioners to make payment claims earlier than they usually would.

However, he warned that there is “significantly more that needs to be done to ensure the criminal defence sector is able to make it through this crisis”.

He said: “If criminal law practitioners, who have to go into prisons and courts to keep the system of justice going, cannot afford to keep going themselves – the whole system risks grinding to a halt.

“It still remains difficult to judge the scale of this crisis. Whether this response is adequate will depend, among other things, on how quickly the police and courts are able to find new ways of handling more routine work – and thus maintaining a volume of cases throughout this period.”

He said it will also depend on the extent to which workload increases above pre-crisis levels – enabling practitioners to recover lost income – once some normality resumes.

“This cannot be presumed”, he said. “Even if so, it would require practitioners to incur significant additional costs long before they see such an increase.”

He also said it is vital that the LAA processes claims as quickly as possible while avoiding technical objections.

Lord Chancellor Robert Buckland said the measures “are a clear indication of their important status both in times of crisis and beyond and the role they play in ensuring the justice system continues to function effectively”.

He made a commitment to continuing to work with the sector “to ensure that the most vulnerable in society are provided with the representation and support they need through our legal aid system”.

The measures are to be kept under review.

Davis stated: “The MoJ must keep its door open and respond urgently to any further feedback from the profession about the measures needed to enable practices to survive.”