Regional law firms continue to grow despite backdrop of uncertainty
This year saw a greater proportion of regional law firms experiencing growth despite the ongoing political and economic uncertainty, a new report shows.
The annual Law Firm Benchmarking Survey compiled by national audit, tax, advisory and risk firm Crowe found that the proportion of regional firms who grew their top lines increased to 78%, from just 71% in 2018, almost recovering to reach the 80% seen in 2017.
It also revealed that almost half (47%) of regional firms enjoyed an increase in Profit per Equity Partner (PEP) of more than 10%.
Ross Prince, professional practices partner at Crowe, said: “Given the current political backdrop results for regional firms were pleasantly surprising, with a greater proportion of firms reporting growth in revenue this year.
“Despite a concern for the UK’s economic future, regional firm participants show self-confidence, with 80% of participants reporting a positive or very positive outlook for their firm in the year ahead.
“As more than half of firms will be focusing on cost control and agile working practices, it seems that building resilience is a theme on the minds of many firm’s management committees.”
City firms suffered another competitive year, with the proportion of firms reporting a fall in revenue rising to 17%, up from 10% in 2018 and 8% in 2019. At the same time, 42% of city firms saw a fall in their all-partner profit pool and PEP.
Overall, notwithstanding a backdrop of Brexit, political and economic chaos, the UK legal industry has shown remarkable resilience, with the majority of firms (80%) seeing an increase in revenue and more than a third achieving growth in excess of 10%.
More than half (57%) of participants stated they have a negative outlook for the UK economy as a whole in the coming year, however firms are more confident about their own position, with 76% stating they have a positive, or very positive, outlook for 2020.
UK law firms are more focused on shoring up their own internal operations and managing operational risks. While previous benchmarking results showed that Brexit worries and the threat of new market entrants were keeping firms up at night, attitudes have shifted in the past 12 months.
When it comes to the top two risks to their businesses, London and regional firms are in agreement on what matters most, highlighting talent retention and the threat of fraud and cybercrime as the top two concerns going into 2020.
As part of this inward focus on talent, 71% of participating London firms and 60% of regional firms are making plans to increase their level of agile, remote and virtual working and 41% of all firms are planning to update their people strategy in the next 18 months.
Having identified cybercrime as the other major threat to their bottom lines, many are undertaking periodic reviews of their digital security.
Ross Prince said: “Ultimately, visible robust data and transactional security may become one of the defining factors for law firm clients when they choose an advisor.”
Jim Gee, partner, head of forensic services at Crowe, said: “Law firms hold substantial amounts of sensitive data and information, so it is logical that fraud and cybercrime is a leading concern.
“This is especially pertinent given that government statistics for 2018 showed that 43% of organisations suffered cyber breaches – a figure which is much higher for larger organisations. Law firms need to understand the extent of their cybercrime vulnerabilities and seek specialist advice to minimise losses.”
