Law Society's survey shows signs of growth
Law firms are achieving growth despite the challenging economic climate, according to the Law Society’s annual Financial Benchmarking Survey.
The survey, organised by the Society’s law management section and compiled by accountants Hazlewoods, found that median practice fee income rose by 3.6% in 2012 (compared with a one per cent increase in 2011), while median net profit per equity partner also increased by 3.6%, from £116,432 in 2011 to £120,677.
However, these are smaller increases in real terms than they seem, as inflation is currently running at about three per cent.
The 166 firms that responded to the survey recruited 824 new staff, with recruitment costs totalling £7.65m. The number of support staff per fee-earner remained steady at 0.61, and the ratio of fee-earners to partners increased to just under five to one.
The survey notes that: “In growing economic conditions the ratio of fee-earners to equity partners tends to increase as practices grow, with the opposite happening in times of recession.”
The median spend on non-salary overheads per fee-earner was £37,992, compared to £37,831 in 2011, an increase of 0.4%. The median fee income per equity partner was £558,773 compared to £545,568 in 2011 (up 2.4%).
Firms paid a median nearly 10% of personal injury and clinical negligence fee income in referral fees last year. These will be banned as of April.
Overall, firms said they were keen to grow in order to compete with alternative business structures, and one in three is contemplating a merger with another law practice within two to three years. One in five said they were likely to seek external investment to expand, and were likely to seek it from a non-lawyer owner.
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