Law firm income increases for sixth consecutive year

The majority of law firms have successfully weathered a challenging 12 months, according to findings from the Law Society's latest financial benchmarking survey.

The income of firms polled has increased for a sixth consecutive year, with a median rise last year of 5.4 per cent.

The latest findings have been considered as generally positive, with net profit per partner rising for the fifth consecutive year and now standing at £146,600 per partner.

However, a quarter of participating firms' partners was found to have taken more money out of their firms than they made in profits, up from a fifth last year.

The Law Society's law management section chair, Robert Banner, warned: 'The firms that take part in the survey usually have a particular interest in high performance and management.

'If a quarter of these firms are over-drawing then the proportion over-drawing for the rest of the profession is likely to be higher.'

Responding to the headline findings, Paul Bennett, a professional practice and regulatory partner at Aaron & Partners, said firms with excess drawings should take advice and improve their firm's drawings position in the short to medium term as lenders and the Solicitors Regulation Authority are often concerned by financial mismanagement.

The survey also found an increased fee income across most work types and most regions and a rise in the breakeven point for a fee earner, up from £102,000 last year to £109,000 this year, mainly due to increases in costs and non-salary overheads.

Paul McCluskey, head of professional practices at Lloyds Bank Commercial Banking, said: 'The last 12 months continued to offer challenges for many law firms and although the majority of results are encouraging, a key priority for all firms in 2016 will be to effectively manage their cash flow.'

Meanwhile, Jon Cartwright of Hazlewoods, which undertakes the survey on behalf of the Law Society, added: 'There is no doubt that most mainstream legal practices are in good shape financially, and more confident as a result.

'Medium-term strategy planning is now firmly back on the agenda, although clearly some areas such as personal injury and criminal continue to be tricky.'

The Law Society's president, Jonathan Smithers, welcomed the findings, particularly after the challenges of the last decade.

The 2016 benchmarking survey was based on questionnaires completed by 200 firms from across England and Wales with a combined income of £1bn. The full survey results will be published in March 2016.