Profits per partner fall 33% at NW law firms
LAW firms across the North West have suffered steeper profit falls than the average decline across the UK’s top 100 firms, a survey has shown.
The region’s law firms have reported an average decline in profit per partner of 33% to £284,000, compared with the UK’s top 100 firms, which saw a 30% fall.
The UK’s Top 10 law firms have maintained their relative breakaway performance over the rest of the sector, despite an average 21% fall in profit per partner to £872,000.
The annual survey by PricewaterhouseCoopers also revealed that virtually all North West firms reported a fall in profits of at least 10%.
David Thurkettle, director at PwC said: “This year has seen the greatest turmoil in the law firm sector since our survey began in 1991.
“It was quite clear when our last survey was published that law firms would be far from immune from the economic crisis.
“As it turns out, the impact has been even greater than we anticipated across the sector. A relatively small number of firms predicted the likely extent and severity of the recession and started to cut headcount and take out cost early in the second half of financial year 2009.”
The survey shows business confidence remains weak among firms with none of the Top 10 ‘very confident’ about prospects for revenue growth over the next 12 months.
The picture in the North West is somewhat mixed, with firms ranging equally from ‘very confident’ to ‘not very confident at all’ about revenue growth prospects, it said.
Against a backdrop of continuing challenging economic conditions and chargeable hours falling by up to 20%, some firms are expected to continue with staff headcount reductions in 2010, the report added.
However, in the North West, no firms are predicting a reduction in fee earner numbers and 50% of firms predict an increase. The majority of firms, however, do expect to reduce support staff headcount.
Mr Thurkettle added: “Looking to 2010 and beyond, we believe structural change in the UK legal profession is clearly underway. The catalyst of the recession has led firms to focus on becoming more efficient, reducing cost by structural change, as well as significant cuts in both fee earner and support staff headcount. There is still some way to go in this respect.
“The recession has put some operating models under severe stress and survival in the current form for some firms may prove a challenge if market conditions do not rapidly improve.”
In the last year several large firms have cut fee earners and support staff and introduced four-day weeks to save costs.
