Deals reduction worries commercial firms

Commercial law firms see the downturn in corporate work rather than a reduction in fees as the biggest threat to profitability.

A recent Sweet & Maxwell survey of finance directors at top 100 law firms revealed that 72% believe reduced mergers and acquistions and corporate finance related work posed a very significant risk to profitability, an increase of nearly a quarter from the 2008 survey when competition between firms over fees was seen as the greatest threat.

Only 12% of finance directors cited cost overruns on fixed fee work as a very significant risk (down from 36% in 2008). One respondent commented that while cost overruns were increasing, firms would rather take on work and risk not making a profit than have too many lawyers not working at all.

Commercial firms are also cracking down on late payments, after seeing large companies such as Woolworths and Lehman Brothers enter into administration.

However, the drop in corporate work has been tempered by an increase in litigation as the economic downturn triggers a rise in the number of commercial court cases. According to figures obtained by City fi rm Reynolds Porter Chamberlain, the number of high court commercial cases increased by 30% between 2005 and 2007.