Law firms report strong performance, according to the Financial Benchmarking Survey

The Law Society of England and Wales published the latest findings from the Financial Benchmarking Survey on 10 March, which finds that resilient law firms reported a strong performance on fee income in 2021/22, despite the challenging economic environment.  

The annual survey, produced by Hazlewoods LLP, which is created for the Law Society’s Leadership and Management Section, is based on financial data from 155 small and medium-sized legal firms with a combined income of over £1.1 billion.

The latest data includes the following findings: despite the challenging economic environment, law firms continued to invest in staff, whilst maintaining a focus on recruitment and retention; total salary costs as a percentage of fee income increased from 58.5% in 2021 to 58.9% in 2022; year-on-year growth in fee income in 2022 was reported by 75% of participants to the survey, with nearly half of all firms seeing growth of more than 10%, the median practice fee income increase was 9.2%; the total number of chargeable hours was collected for the first time, which found that the median number of chargeable hours decreased compared to 2021, totaling 841 hours.

Commenting on the findings, Paul Bennett, Chair of the Law Society’s Leadership and Management Section, said: “Although we need to remember these findings pre-date the cost-of-living crisis, the UK’s political contortions of 2022 in terms of multiple prime ministers and of course the impact of the war in Ukraine. The results reflect the property boom of 2021 and the challenges in the service economy during 2021/2022 financial year. Resilience is, though, a good sign knowing as we do that firms are currently steering through the on-going choppy waters.”

Bennet suggests that firms reviewing this year’s survey might want to consider the growth in fee income, the 10-day reduction in lockup and the median equity capital trends, which provide useful insight into fee income, collection, and capital needs for the future.

Law Society President, Lubna Shuja, added: “It is encouraging to see law firms continuing to perform strongly, especially given the difficult economic climate we are all facing. As the cost-of-living crisis hits England and Wales the legal sector will continue to be an important driver of the UK’s economy. It is good to see firms focusing on helping staff deal with the crisis and increasing salaries to retain and recruit staff. Of course, some firms struggle more than others, with lack of government investment continuing to hit legal aid firms.”