Challenging year ahead for firms despite 2015 growth
Firms struggle to deliver growth levels achieved over last two years
Despite a 6 per cent increase in fee income last year, law firms should expect a challenging 2016, a leading bank has said.
According to NatWest's latest Legal Benchmarking Report, the performance of law firms operating in the SME space with revenues up to £35m has improved, but at a slower rate to previous years.
Over 390 firms took part in this year's research, produced with Robert Mowbray of legal consultancy Taylor Mowbray, showing healthy improvement in both revenue and profit levels.
The results showed that fees increased by 6 per cent in 2015 - considerably above inflation. There was some regional variation, however, with London achieving 10 per cent, and the North East and North West reaching just 4 per cent.
For the year ahead, confidence remains positive despite being lower than in previous years. Some 44 per cent of firms have predicted fee growth to rise by 10 per cent, compared to 56 per cent 12 months ago.
Profit per equity partner also rose by 8 per cent in the last year, which led to a £4k increase in median profit per partner on 2014 - up from £107,000 to £111,000.
The report suggested that either the much talked-about pricing pressures were beginning to ease or that firms were becoming more robust on pricing.
Reflecting on the findings, Steve Arundale, head of professional services at NatWest said: 'Early indications suggest that 2016 could carry some performance challenges for many firms. Business levels witnessed in 2015 could be described as the new, post-recession norm; and many firms appear to be struggling to deliver growth levels achieved in the previous two years.
'Although growth appears to be slowing to a new operating norm,' he added, 'firms still have a great opportunity to maximise their operations and prosper'.
'Leaders need to make sure they are asking the right questions around operating efficiency, performance, and reward and taking proactive steps towards investment around technology benefits.'