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Large UK law firms to prioritise international expansion

Top 25 firms sourcing more than 40 per cent of fee income from international operations

31 October 2012

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By Manju Manglani, Editor (@ManjuManglani)

International expansion continues to be a strategic priority for the largest UK law firms, a market survey has found.

Half of the top 25 firms now source more than 40 per cent of their fee income from international operations.

In addition, half of the top ten firms said they expect to merge with or acquire an international firm in the next three years, up from just 17 per cent in 2011.

The annual PwC survey of the top 100 law firms in the UK received responses from 80 per cent of the top ten firms, 88 per cent of the top 25 firms, 80 per cent of the top 50 firms and 57 per cent of the top 100 firms.

Fifty-eight per cent of all respondents said they view mergers and acquisitions as a major opportunity for growth. The larger firms said they are focusing on international mergers, while respondents from mid-tier firms said they are focusing on merging with other UK firms.

Said David Snell, head of PwC’s professional partnerships advisory group: “Continued focus on cost reduction and innovative delivery is required across all firms to maintain profitability in a highly competitive UK market. At the same time, international expansion into the emerging markets offers an opportunity for revenue growth for firms that have the scale and appetite to compete on a global playing field.”

The survey found that business process outsourcing (BPO) is an area of increasing maturity. Most firms have taken steps to evaluate outsourcing in recent years, with some clearly embracing it, but a few remaining to be convinced of the fit with their culture and strategy.

The greatest uptake of BPO has been in travel, facilities management, IT infrastructure, payrolls and training. The report notes that there has been less interest in outsourcing accounting and HR processes, procurement, secretarial services and IT user support, perhaps because of greater cultural sensitivities, confidentiality and higher perceived risk.

Legal process outsourcing/offshoring is expected to become an increasingly important area for the sector as pricing pressures and the threat of new entrants combine to force firms to reappraise how they deliver legal services, while maintaining quality as a non-negotiable.

When asked about the outlook of the legal sector, the report notes that there is a commonly-held view that the next 12 months will continue to be challenging. Some top 11-25 firms in particular acknowledged the challenges of operating in an increasingly competitive and mature market and said that further consolidation in the UK mid-tier is inevitable.

Half of the top ten firms said they are not very confident about the prospects for growth of the legal sector over the next three years.

There is greater optimism among the top 50 firms – about half said they believe they will outperform the market in the period to 2015.

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