Profits under Pressure for Top UK Law Firms
Byline: John Duckers Business Editor
Profits are under pressure at the Top 25 UK law firms, according to a new survey.
In the Midlands, 35 per cent of firms reported a decrease in profits compared to the same period last year.
However, the PricewaterhouseCoopers 2003 Financial Management in Law Firms report said this presented a much more optimistic picture than other parts of the country, with 47 per cent of firms across the UK reporting a decrease in profits per equity partner in 2003.
Nationally, the rate of increase in equity partners has outstripped the rate of increase in fee income, and fee-earner headcount has increased at 65 per cent of Top 25 firms even though the economic climate has remained tough. This has resulted in a squeeze on profitability - something law firms have not experienced for many years.
Staff costs are the main expense for many law firms and, so far, not enough has been done to manage these.
David Waller, chairman of PricewaterhouseCoopers in the Midlands, said: 'With a slowdown in fee income growth, reduced staff utilisation and profit margins under pressure law firms need to look very closely at their staff costs - especially if difficult market conditions continue into 2004.'
However, despite the situation nationally, Midland firms remain optimistic about the future especially in the area of recruitment. Some 63 per cent of firms in the region are expecting an increase in the number of equity partners, reflecting greater optimism than any other area of the UK.
But firms must consider the impact of this, said Mr Waller.
He noted: 'There is a reason to be positive about the performance of law firms in the Midlands. …