Regional UK law firms growing faster than City counterparts

Regional law firms in the UK have grown faster than City firms over the past 12 months, market research has found.

The annual benchmarking survey of law firms by accountancy firm Crowe Clark Whitehill found that firms located outside of London recorded a higher rate of annual growth in revenues than their counterparts in the City.

According to the data, 86 per cent of regional firms reported increased annual revenues, compared to 64 per cent of City firms. By comparison, both types of firms reported average growth of about 60 per cent in the previous year.

At 36 per cent of City firms, revenues fell in the past year, compared to only 14 per cent of regional firms with declining revenues. But, of the City firms which reported lower revenues, the majority said the decrease was less than two per cent.

"Throughout 2013, alternative business structures were the talk of the sector. Yet what this survey proves is that a number of important trends have gone largely unnoticed by the majority of onlookers during the past 12 months," commented Louis Baker, head of professional practices at Crowe Clark Whitehill.

"Tellingly, despite predictions of doom, many firms have responded robustly to new commercial threats in the sector on the back of the emerging economic recovery. With a spate of recent mergers occupying the headlines, many others have had a successful year laying the ground for greater financial stability and a platform for financial success in 2015."

Half of regional firms reported an increase in revenues of more than 10 per cent, while a further 36 per cent said revenues grew by less than 10 per cent.

Among City firms, however, just over a quarter (27 per cent) said that revenues grew by more than 10 per cent, while 36 per cent said it rose by less than that amount.

Regional firms also fared better at profits per equity partner (PEP), with average growth of 28 per cent, compared to 16 per cent growth recorded by City firms.

A staggering 41 per cent of responding City firms said PEP fell in the past year, compared to 14 per cent of regional firms.

However, PEP at City firms was significantly higher, at £463,239 on average, compared to £186,529 at regional firms, according to the survey.

Strategic priorities

The research found that, among both types of firms, a key priority over the next 12 months will be identifying strategies for growth and improving profitability.

Appetite for mergers and acquisitions seems to be low, with 54 per cent of City firms and 71 per cent of regional firms saying these are unlikely in the next 12 months. Instead, their focus appears to be on organic growth or lateral recruitment.

When asked about their investment plans over the next year based on their strategic priorities, a similar amount of both City (27 per cent) and regional firms (32 per cent) said their biggest investment would be in their people.

A further 32 per cent of regional firms said they would invest heavily in technology, compared to 9 per cent of City firms.

Interestingly, nearly a quarter (23 per cent) of City firms said they would invest in marketing or business development, while no regional law firm responding to the survey said this would be a priority.

But, 14 per cent of regional firms said they would be spending on their premises, compared to five per cent of City firms.

Around four per cent of both City and regional firms said they would invest heavily in acquisitions.

This article was first published in sister publication Managing Partner.