Legal and Finance: Costs of Staff Put Pressure on Law Firms
Byline: John Duckers
Law firms in the Midlands have reported the lowest growth in profits compared with the rest of the UK.
According to PricewaterhouseCoopers' annual Financial Management in Law Firms Survey, the pressure on profits is due to rising staff costs.
Forty-seven per cent of firms in the Midlands reported that profits have stayed the same or dropped. This compares with 43 per cent in London and the South-east and 23 per cent in Yorkshire and Humberside.
Almost a third of all firms reported a decrease in profits last year despite 77 per cent claiming an increase in fees billed. Altogether, this squeeze on profits is due to escalating staff costs, with 65 per cent of the Top 100 firms revealing staff costs in excess of 40 per cent of fee income.
David Waller, chairman of PricewaterhouseCoopers in the Midlands, said: 'The marked reduction in institutional public offerings and mergers and acquisitions activity has impacted most on the results of the larger and internationally based law firms who are more reliant on corporate activity.
'Smaller firms are fairing better although there has still been an across the board reduction in the number of law firms reporting increased profits from 71 per cent last year to 61 per cent this year.
'The salary increases witnessed over the last few years have increased staff costs as a proportion of fees billed this year with 65 per cent of Top 100 firms - a 21 per cent increase on last year - reporting staff costs in excess of 40 per cent of fee income. …