An annual benchmarking survey has revealed that law firms are steadily profiting for the ninth year in a row.
Now in its 18th year, the Law Society Law Management Section’s Financial Benchmarking Survey 2019 contains responses from 210 firms. Participants provided two years’ worth of data, enabling like-for-like comparisons of business metrics between 2017 and 2018.
For the ninth consecutive year, participants reported a rise in median fee income, though this year’s 4.2% increase is the lowest since 2013 (4.1%). 71% of participants reported growth, with a quarter posting a rise of over 10%.
Revenue growth was experienced across all regions and most types of work. Wills, probate, estate administration and trusts led the way (7.7%). Even claimant personal injury posted a modest 2.8% rise.
Net profits are also up for the ninth year in a row, with the median surplus per equity partner 1.4% higher at £151,613. 60% of firms reported higher PEP.
The total number of equity partners across all firms actually fell year on year, from 1,269 to 1,258. Firms boosted the net profit margin from a median of 21.7% to 23.2%.
15% of participants also reported that partners had drawn more than profits for two years in a row. Median partner balances (capital account, current account and tax reserves, or retained profits in a limited company) fell for the first time in recent years.
The number of fee-earners is on the up, which continues to ‘demonstrate that partners in most practices are optimistic about the future’.
Paul McCluskey, UK head of professional practices, SME banking at Lloyds Bank Commercial Banking, said: ‘With an uncertain economic outlook, law firm leaders must drive efficiencies in their business and challenge their teams to maximise opportunities.
‘Compliance officers for financial management need to think about the metrics in direct relation to the firm’s own performance, and create an action plan which delivers shared objectives, as well as behavioural, and perhaps cultural, change, to reinforce the underlying message that “cash is king”.
‘Sound financial management is paramount.’
The full report will be available to download free from the LMS website later this month.
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