The march of US firms onto UK territory continues unabated, while UK firms face a double whammy of pressure on fees and rising staff costs, according to PwC’s latest annual Law Firms’ Survey.
In the past few years, US firms have poached senior partners and lawyers from UK firms, the survey notes. ‘These hires, coupled with leveraging the strength of their US business relationships (and in particular, US Private Equity houses), means these firms now represent formidable competition and are undoubtedly “here to stay”.
‘In addition to taking market share, their ability to pay partners without lock step restrictions and fee earner salaries a step beyond UK firms, means that traditional partner remuneration and staffing models are also being heavily disrupted.’
Meanwhile, UK firms face a series of challenges including clients’ changing demands and new technologies. At least 70% of Top 100 firms surveyed achieved fee income growth, but the average increase was only between 2.3% and 3.7%. Pricing remains an issue, with fixed fees now accounting for more than a quarter of work in Top 25 firms.
David Snell, PwC partner, UK legal sector leader, said: ‘Key drivers in the sector include significant consolidation in the market through mergers & acquisitions, greater international expansion, a wave of US firms penetrating the UK market and the impact of the Legal Services Act 2007.
‘Alongside this, “Megatrends” such as the rise in digital technology (including the potentially seismic shifting Artificial Intelligence), major changes in the geo-political landscape and social change are all leading to unprecedented levels of disruption.’
Snell said the most important factor for success was ‘clear and effective leadership’.
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