PwC reports marked difference between the fortunes of mid-tier & top-tier firms
Lawyers are crunching numbers after PwC published its annual Top 100 law firm survey.
The 2015 survey uncovered a marked difference between the fortunes of mid-tier and top-tier firms. While fee income is generally up at 82% of law firms (compared to 70% last year) only half the Top 10 enjoyed UK fee income growth.
Profits per equity partner for the top 11-25 law firms increased by 17% (to £641,000), while the 3.5% rise at the Top 10 firms (to £1,067,000) was mainly driven by reductions in the number of equity partners. Top 10 firms’ revenues were also reduced by 3.5% due to Euro exchange rate movement.
The survey suggests that firms’ international operations are diluting their profitability—UK profits per partner at the Top 10 firms are 75% above that of their international colleagues.
As far as profit margins are concerned, the average margin is nearly 40% at Top 10 firms, 29% at Top 11-25 firms, and 24.5% for Top 26-50, while the margin for Top 51-100 firms has reduced by three per cent to 21%.
David Snell, partner and leader of PwC’s Law Firm Advisory Group, says: “Our 2015 Law Firms’ Survey is set in the context of a recovering UK market, but with ongoing challenging macro-economic conditions for global law firms.
“The strength of sterling against the euro has adversely impacted many firms’ international performance on a sterling basis—the basis upon which most firms distribute their profits to partners. However, the UK has enjoyed a more buoyant deals market, greater levels of regulatory activity and an active real estate sector.
“These factors are reflected in our survey, which shows a somewhat disappointing performance from the Top 10 firms, while at the same time a resurgent Top 11-25 who seem to have re-focused their strategic intent.
“Mid-tier City firms in particular have performed well through a combination of sensible lateral hiring programmes, M&A and a focus on cost control and key metrics such as chargeable hours. However, a slow-down in litigation, and difficult conditions in some industry sectors, have been a drag on performance for some in the Top 26-50.”
