New survey says smaller UK law firms in London & SE enjoying increased profits but worried about next year
SME legal firms are recovering well from the effects of recession, according to new research from chartered accountants HW Fisher & Company but…
The good news is that in the chartered accountants’ third annual poll of 75 of SME law firms in London and South East England shows 4.5% growth overall, rising to 10% at the larger end of the ‘small practice’ spectrum. Profits too have risen – with the best performers recording a 17% rise on the previous year.
But in spite of the brightening outlook, some practices remain cautious about their potential for internal expansion. More than a third (36%) are pursuing outside investment instead, and 43% plan to bring in new non-lawyer partners (a rise against last year’s figure of 33%). A little over a quarter of the firms polled (26%) report having been approached by a legal consolidator but 33% concede a merger or acquisition is still likely.
The Legal Services Act, which allows such non-lawyer partnerships and mergers to take place, has so far had little impact on the workings of SME practices. An overwhelming 93% of those polled have yet to notice any effect on business. But more than a third (36%) think the situation could change in 2014, as the full impact of the LSA begins to be felt.
The current economic overview seems upbeat for some small legal firms. Turnover per employee grew to a new average of over £100,000 per employee for the survey period (2011/12) – or a rise of 11% on the previous year, well above that of inflation. Litigation work remains a key part of the small practice agenda. Personal injury and clinical negligence work made up 15% of respondents’ business, while 5% was in employment and 4% in probate.