Three-quarters of finance directors at the top 100 City law firms want to increase fees in the next year, according to new research
However, careful diplomacy will be required, as 42% of those polled by Sweet & Maxwell said downward pressure on fees from clients posed a risk to profitability.
Many law firms froze or cut their fees in response to the global economic downturn, while rising inflation led to a real-terms decrease. Last year, only 61% expected to raise their fees.
According to the research, many firms feel they have exhausted the potential for cutting overheads and now need to raise fees again.
Law firms continue to be attracted to mergers as an option for increasing business potential, according to the research—more than a third said they were considering a tie-up in the next year. In July, Davies Arnold Cooper and Beachcroft confirmed they will merge, as did Barlow Lyde & Gilbert and Clyde & Co, while Clyde & Co also completed its merger with Canadian firm Nicholl Paskell-Mede.
Fewer law firms (17% compared with 36% polled last year) are considering dropping unprofitable areas of law, suggesting they are taking a longer-term view.
As far as opportunities presented by the Legal Services Act are concerned, some 38% of top 100 law firms are considering making non-legal staff such as HR directors into partners, and the same proportion are considering incentives for staff such as offering them equity in the business. A third of firms may hire an accountant as a fee earning partner, and 29% would consider raising capital through a private equity investment.
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