Insolvency experts have predicted a rise in the number of law firms that will face bankruptcy in the coming months, after a well-known firm in the north-west closed its doors last week.

Lees Lloyd Whitley (LLW) – a 190-year-old Merseyside firm with 90 staff – ceased trading and is now in administration. The closure is understood to be the result of the severe downturn in the property market, which hit LLW’s remortgaging work, coupled with the recent loss of some major clients.

The firm’s work has been divided between a number of regional firms, and some of the partners have moved to those firms. Administrator Parkin S Booth & Co was unable to confirm the number of redundancies or the level of the firm’s debt.

Meanwhile, insolvency experts warned that more law firms are likely to face collapse, particularly at the smaller end of the market.

Joanne Wright, insolvency partner at administrators Begbies Traynor, said: ‘LLW won’t be the last practice to go this way. We’ll see more firms going into administration over the next three years.’

She predicted: ‘We haven’t see the worst of it yet and we’ll be in difficult trading conditions for the foreseeable future.’

Wright said she had seen a ‘significant increase’ in the number of solicitors entering into individual voluntary arrangements (IVAs) with their creditors. The procedure enables them to ringfence their debt and either continue trading or sell their business.

‘IVAs used to be a rarity for solicitors and other professionals, but now we’re seeing them on a regular basis,’ she said.

Wright warned that partners in small firms that had not become limited liability practices risked losing everything, including their home, if they went bankrupt. She advised those in financial difficulty to seek advice.

Many firms, she said, had expanded on the back of the success of their property departments, and were now suffering due to a lower workload and higher overheads.

James Money, restructuring director at accountants Smith & Williamson, stressed that the hike in insurance was also hitting firms. He said the bigger firms which had been robust in their approach to making redundancies were more stable now, while smaller firms were suffering.

‘We’ll see a large number of firms closing or going through some sort of insolvency process,’ he predicted.

Money said professional practices were often poor at cash management and when problems arose as a result, they were hit harder than they might have been.