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Pricing pressure a ‘high risk’ to profitability at UK’s top-100 law firms

Clients are demanding 'more efficiency and cost effectiveness'

25 February 2014

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By Manju Manglani, Editor (@ManjuManglani)

Downward pressure on fees from clients is presenting a risk to the profitability of commercial law firms, research has found.

The survey of 25 finance directors at the UK's top 100 law firms found that three quarters felt pricing pressure was posing a high risk to profitability, while a quarter said it posed a medium risk.

Continued weakness in corporate work was also highlighted as a high risk for half of respondents, with 44 per cent saying that it posed a medium risk.

The survey received responses from 25 top-100 firms, of which nine were in the top 25 rankings.

"It will be critical for law firm leaders to focus on how their firms can respond effectively to client demands for more efficiency and cost effectiveness in the delivery of legal services," said Sam Steer, head of large law at Thomson Reuters' legal division, which conducted the survey.

"That will mean, among other things, a willingness to adopt more flexible approaches that can tailor staffing and leverage technology to support work processes, and it will mean pricing models that meet the needs of particular clients in particular situations."

The other top areas of high and medium risk highlighted by the majority of respondents included competition between law firms over fees, cost overruns on fixed-fee work and clients consolidating their legal panels.

Work being taken in-house (64 per cent) and late payments by clients (60 per cent) were voted the top areas of medium risk. The lowest-risk area for 80 per cent of respondents was a lack of capacity to meet increasing demand.

 

 

 

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