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Law firms showing signs of growth, says Law Society report

Legal practices are continuing to show signs of growth, according to new research from the Law Society’s Law Management Section (LMS).

10 May 2012

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The LMS annual financial benchmarking survey shows that practice fee income increased by one per cent in 2011, as practices continued to climb out of the hit from the recession. In 2009, firms saw a 6.5 per cent drop in fee income.

The survey of LMS member firms also revealed that average net profit per equity partner increased from £112,549 to £114,853 in 2011, a rise of two per cent.

Chris Marston, head of professional practices at Lloyds TSB Commercial, which sponsors the survey, believes that going forward the omens are good for firms. “2012 will be a pivotal year for solicitors,” he said. “New entrants and external capital will undoubtedly bring change, but I firmly believe that this will expand the market for legal services and create opportunities for innovative, well-managed firms with strong leadership and effective financial management.

“Getting in shape now is therefore very important, and this year’s survey shows admirable resilience on the part of solicitors. Fee income rose slightly in difficult economic conditions and I was pleased to see that median net profit increased by two per cent – modest, but nevertheless building on last year’s improvement,” he continued.

“I was also struck by the accuracy of last year’s predictions – respondents suggested that income growth might be around one per cent and they were spot on. This year, they are forecasting three per cent growth, so hopefully there are better times ahead.”

The LSM survey is now in its 12th year and is widely regarded as the annual financial health check, particularly for the smaller end of the legal profession.

Other findings included:

  • The number of support staff per fee earner decreased from 0.65 to 0.61, an average saving per fee earner of £821.

  • The 181 participants reported total recruitment costs of £2,775,770 paid to recruit 1,050 people. This is about 11 per cent of the reported workforce, and runs ahead of the £2.1m and 8 per cent in the 2010 survey.

  • The median spend on non-salary overheads per fee earner was £38,142 compared with £37,163 in 2010, an increase of 2.6 per cent.

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