Law firm business confidence on the up

Law firm business confidence has proved strong in the first quarter this year, with around half seeing an increase in the number of new matters, recorded chargeable hours and fees billed, a new report showed. 

Conveyancing firms have been particularly busy, with the number of new matters increasing by 54 per cent, according to the first Law Society Law Management Section’s quarterly pulse survey of small and medium-sized firms.

It found fee-earner headcount had increased for 23 per cent of firms in the first quarter, while just 4 per cent reported redundancies; and though one in five said their cash position had worsened – 40 per cent of firms reported being in a better cash position than they were in the previous quarter. 

Firms are also rethinking their use of office space. The survey revealed that 15 per cent of firms with physical premises had already reduced their office space with another 10 per cent planning to do so in the next quarter.

Financial survey

A separate financial benchmarking survey of firms, also carried out for the Law Management Section, revealed a third of firms had, in the first wave of covid-19, anticipated making fee-earners redundancies. 

The survey, which provides a snapshot of conditions last year, focused on the impact of the pandemic up to October 2020. 

Three quarters of the 145 firms surveyed had furloughed fee earners, with one in eight fee-earners and third of support staff placed on furlough.

However, the survey found that many firms were performing well in early 2020, with 60 per cent of participants reporting year-on-year growth in fee income last year and a quarter seeing more than 10 per cent growth. 

Most firms (83 per cent) took advantage of government help, with 75 per cent of firms furloughing fee-earnings and 25 per cent furloughing support staff.

The new survey shows an increase in business confidence, with just over half (52 per cent) of firms predicting an improvement in their fees and 46 per cent predicting an increase in profitability.

However, the key challenges firms expect to face in the coming year include the wider economic conditions, cashflow, succession planning and changing employee working arrangements.

Paul Bennett, chair of the Law Management Section, said: “Our new pulse survey is intended to support the profession with some detailed data collection on current issues every quarter.” He encouraged more firms to participate in the next survey. 

Darren Cable, UK head of legal at Lloyds Bank which sponsored the survey, commented: “The impact of the pandemic has meant that many of the traditional norms have been challenged and the economic outlook has remained uncertain.

"Firms will need to adapt to these new conditions and our team of Lexcel-trained industry experts continue to work closely with businesses across the legal profession, providing the funding and tailored support to help them look forward to a brighter future and help Britain recover.”