Member Article

UK Law firms witness moderate growth

UK law firms have witnessed moderate growth in the last quarter of the 2011, after a tough financial year.

A 6.3% increase in fee income was generated in Q4 compared with the same period in 2011, which has been achieved predominantly through an increase in fee earner headcount of 5.6%, with an increase in fees per fee earner of 1.1%, also contributing to growth.

Final quarter results were in line with the strong annual performance delivered by the UK legal sector, as firms achieved a 6.6% increase in fee income for the financial year to the end of 30 April 2012, in comparison with the previous year.

Firms in the 26-50 tier saw the highest rate of growth at 9.7%, which was boosted by merger activity and recruitment. many firms with a strong international presence saw their offices outside of the UK, particularly in emerging markets, perform well.

Many firms also saw strong results despite the downturn due to their focus on soecific preactice areas such as litigation.

Stephen Hall, Partner at Deloitte said: “The figures for the year show a positive level of fee generation, especially when considering the current financial climate.

“Nevertheless, firms have continued to face challenges as a result of intense competition, pressure on rates, and a transfer of risk through the increased demand for fixed fees.

“The ability of law firms to control costs against a backdrop of high inflation will be key to maximising the profitability delivered by this revenue performance.”

Firms are now predicting a modest rate of growth for the coming financial year due to a stagnant domestic marketplace and questions over the Eurozone. Many are also struggling to deal with structural changes following the introduction of the Legal Services Act.

He added: “This combination of factors is driving firms to review their strategy, organisational structure and future investments.

“As firms attempt to differentiate themselves to achieve a competitive advantage, we expect to see more merger activity as this is one route through which firms are able to broaden their service offering to clients, and win a greater share of clients’ legal spend.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .