Macroeconomic factors drive differing law firm performance
5 June 2015
- Top 100 law firms achieve average fee income increase of 6.3% in FY15;
- Modest increase in fees per fee earner of 2%;
- Firms forecast fee income growth of 5.3% for FY16.
The UK’s largest law firms achieved an average increase in fee income of 6.7% in the final quarter of the financial year, according to Deloitte’s latest Quarterly Legal Sector Survey. This has resulted in an overall increase of 6.3% for the year ended 30 April 2015 (the most common financial year end for UK law firms).
Approximately two thirds of the fee income growth for the year resulted from increased fee earner numbers, mainly as a result of mergers and lateral hire recruitment. The remaining third was achieved through an increase in chargeable hours and rates recovered, both of which had a similar overall impact.
Jeremy Black, partner in Deloitte’s professional services practice, said: “The average growth of 6.3% masks a wide range in the performance of UK law firms. Firms which focussed predominantly on the London market, for instance, generally outperformed both those with a more international focus and those focussed on UK markets outside of London.
“Firms with a more global footprint have faced a particularly challenging year, with the economic environment in certain overseas jurisdictions proving especially difficult. The reduction in the Sterling/Euro exchange rate has also put further pressure on Sterling denominated results.”
The strongest performance has been for firms in the 11-25 and 26-50 size categories, where annual growth in fee income of 4.4% and 6.9% respectively was achieved largely through increases in fees per fee earner of between 3.6% and 3.7%.
Mergers and lateral hires have also led to strong fee income growth for firms in the 51-100 size category. The market has nevertheless remained tough for these firms, with average fees per fee earner increasing by less than 1%.
The survey also found that law firms expect relatively strong growth in the next financial year, predicting an average growth of 5.3% for FY16.
Black commented: “As far as fee income is concerned, firms remain confident in their outlook for the year ahead, predicting growth rates which will outperform those of the UK economy. However, many are increasingly concerned that rising costs could make it difficult for firms to increase their profitability this year.”
Notes to editors
This is Deloitte’s 32nd Quarterly Legal Sector Survey of the top 100 UK law firms in the UK.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
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