The recent increase in National Insurance contributions has significant financial implications for listed law firms, with major players outlining strategies to mitigate the impact.
The law firm Gateley has projected an additional cost of £1.8 million due to the rise in National Insurance, a burden it plans to manage through strategic pricing adjustments and efficiency enhancements. This comes as part of a broader financial update where Gateley reported a 5% growth in both revenue and underlying profit before tax for the first half of the fiscal year, ending 31 October, with revenues expected to exceed £86 million and profits reaching £10.5 million. Their strong financial positioning was further evidenced by a net cash balance of £1.2 million, a marked improvement from the net debt of £2.2 million recorded the previous year.
According to Gateley, activity levels, especially in transactional services, have seen a notable increase in the first half of the year, contributing to a positive outlook for the coming months. The company’s strategy involves harnessing the benefits of its organic investments and maintaining high fee-earner utilisation as key drivers for their expected performance. Current expectations for the fiscal year ending in April 2025 anticipate revenues of £184 million and an underlying pre-tax profit of £24 million.
Gateley’s chief executive, Rod Waldie, emphasised the firm’s resilience, which stems from its diversified range of professional services. This diversification strategy, coupled with recent successful organic investments, has not only cushioned the firm against the financial challenges posed by increased National Insurance costs but also positioned it to explore further growth opportunities in legal and consultancy services.
Meanwhile, another listed firm, Knights, also anticipates an added £2 million expense due to the National Insurance increase but remains optimistic about offsetting these costs. Knights projects a 5.4% revenue growth for the half-year to October, nearly reaching £80 million, with a significant 26% rise in underlying profit before tax to £14.6 million, marking an increase in its profit margin to 18.4%. The firm’s acquisition strategy, including the recent £12.5 million purchase of Thursfields Legal, plays a critical role in this financial narrative.
Knights has taken strategic steps to bolster its financial capabilities by securing an extension of its revolving credit facility to £100 million, thereby enhancing its capacity to pursue further acquisitions. Despite a higher net debt of £50 million, the firm continues to focus on improving its operational efficiency and maintaining quality revenues, contributing to a robust performance outlook for the remainder of the year as indicated by chief executive David Beech.
The increase in National Insurance contributions presents a financial challenge, yet leading law firms like Gateley and Knights demonstrate resilience through diversified services and strategic financial planning, ensuring their ongoing growth and stability.
