Two firms succumbed last week to what some experts insist is the most precarious month in the calendar. But doubts remain that ‘crunch month’ January is any more dangerous for firms walking the financial tightrope, with figures appearing to contradict the widely held view that more practices are prone to collapse in the new year.

Historic Bristol firm Burroughs Day and north-west practice Johnson Law both entered administration this month. This period of the year has seen some of the biggest recent collapses in the legal profession, including Cobbetts and KWM.

Steven Cottee, a partner at Pinsent Masons, advised the administrators of Burroughs Day on its pre-pack sale to Bristol firm Metcalfes Solicitors. He said the collapse of the 190-year-old practice illustrates the difficulties firms experience at this time.

‘January is often a very tough month for law firms – cash collections are slow over the Christmas period and into New Year,’ he said. ‘Rent is payable just before Christmas and partners’ tax is due at the end of January. This can lead to a perfect storm where there is insufficient cash to meet those significant liabilities.’

Giles Murphy, head of professional practices at financial advisory firm Nexia Smith & Williamson, described 31 January as ‘cash crunch day’ for law firms, with fee-earning work slowing in the build-up to Christmas and tax bills looming over directors.

He added: ‘Some law firms treat the tax reserve as a source to dip into throughout the intervening period to pay other costs. If fee-paying work dries up and January arrives, managing partners can find cash reserves somewhat limited.’

However, statistics from the Solicitors Regulation Authority do not appear to show a spike in firms closing in this period. In the past two Januarys, a total of 84 firms have closed for various reasons – fewer than closed in September 2017 alone.