Does continued rise in partner pay impact on law firms’ ability and desire to invest in technology and process improvement? In the Orange Rag out next week we will be giving you our educated opinion after a series of high-level conversations but what we can tell you today (17 June) is that the average annual earnings for partners at UK law firms has broken through the £200,000 barrier for the first time, according to Hazlewoods, Chartered Accountants and Business Advisers who specialise in the legal profession.
Hazlewoods says that average earnings for law firm partners reached £201,000 last year, which is up 7% compared to the previous year (£187,000) and 35% versus five years ago (£149,000 – see graph below). The figures are based on earnings of both equity and fixed share partners
The increase in earnings reflects the continued growth of the UK’s legal sector in recent years, which has been less affected by Brexit than originally feared. Whilst law firm partners’ earnings took a big hit from the recession, they have now more than made back that lost ground.
Key revenue areas for larger law firms such M&A, corporate finance advisory and real estate have remained buoyant up until Q4 2018. However, low levels of corporate finance work in Q1 and a weaker property market may take some of the wind out of their sales.
Partner profits have been helped by law firms being relatively careful not to create too many new partners. Hazlewoods also says that the increase in partner earnings has also been helped by law firms automating or outsourcing labour-intensive tasks to free up time for fee-earners to take on more premium work with high hourly rates.
Andy Harris, a partner at Hazlewoods, comments: “UK law firms learned a lot of lessons from the last recession. They run much tighter ships and are more efficient at converting hours worked into bills which are paid.”
“Expensive new office overheads are taken on with more care and diversification efforts that fail aren’t allowed to run at a loss for too long.”
“That efficiency drive within the UK legal sector is making a real difference to partners’ incomes.”
According to one headhunter we spoke to, the continued rise in partner pay means that, while creating better processes and investing in technology is widely talked about publicly, the reality is that there is still no burning platform, which means change is far slower than represented. We’ve already had a number of really interesting conversations on the topic, including where progress is being made and why. Please contact firstname.lastname@example.org to contribute your views.