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Slowdown in deals volume at top-50 UK law firms

Average value of deals continued to fall in 1H 2014 

22 July 2014

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By Manju Manglani, Editor (@ManjuManglani)

Growth in the number of deals handled by the UK's top-50 law firms has slowed, according to data out today from the Law Society and Legal Monitor.

The City Legal Index found that the average year-on-year growth in the number of deals in the first half of 2014 was 7.1 per cent. This is below the growth of 12.4 per cent in 2013 as a whole.

In addition, the average value of deals continued to fall in the first half of 2014. The average decrease between January and June was 11.6 per cent, compared to a 22.7 per cent decrease in 2013.

The report says that the slower rate of growth in the number of deals and the continued decrease in the average value of deals suggests that the UK's economic recovery could be slowing down.

"Most economic forecasters currently expect the UK economy to continue to recover through 2015, albeit at a slightly lower rate. Taken with recent indicators for other sectors, today's news that growth in legal deals has shown a significant drop - along with their values - raises questions about how long the recovery will continue at its current rate," said Law Society president Andrew Caplen.

"Recent strong financial performances of magic circle firms reflect high growth in mergers and acquisitions, but growth in corporate & commercial and banking & finance deals slowed in the first half of this year.

"Given the legal services sector's wider economic links to the rest of the UK, a slowdown in the City Legal Index is a sobering reminder that the economy is not completely out of the woods yet."

The main source of the slower growth was fewer deals in finance and banking, at 7.8 per cent in 1H 2013 compared to 19.8 per cent in 2013. Meanwhile, fund/investment management deals decreased by 10.4 per cent between January and June, compared to a 7.3 per cent increase in 2013.

Growth in real estate and construction deals also slowed from the high rates in 2013, at 10.3 per cent in 1H 2014, compared to 82.2 per cent in 2013. Meanwhile, growth in manufacturing deals dropped to 12.8 per cent in the first half of 2014, compared to 32.3 per cent in 2013.

The fastest-growing sectors in terms of number of deals between 2009 and 2013 were technology, media & telecoms and energy & utilities, both of which continued to grow significantly in the first half of 2014, up 17 per cent and 19 per cent, respectively.

In real terms, total deals value increased by about 1.3 per cent a year on average between 2009 and 2013, but overall average annual growth in the UK economy was 1.2 per cent during this period.



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