The UK’s largest law firms achieved average fee income growth of 7% for the year ended 30 April 2019 (the most common financial year-end for UK law firms). The findings come from Deloitte’s latest Quarterly Legal Sector Survey, a survey of key performance indicators from the top 100 UK law firms.
The fee income growth of 7% was achieved through a combination of growth in fee earner headcount (4%) and an increase in rates recovered (3%). Fees per fee earner grew by 3% year-on-year.
Jeremy Black, partner in Deloitte’s professional services practice, said: “Over the course of the year, the UK’s top 100 law firms performed strongly, and the overall level of performance was above what many expected at the start of the year.”
Firms across each size category saw growth in fee income that was significantly larger than the cumulative impact of the growth in fee earner headcount and the movement in chargeable hours per fee earner. This demonstrates that firms achieved above inflation increases in their recovered rates, suggesting the pricing initiatives that many firms have been pursuing over the last few years have delivered benefits.
For the quarter ended 30 April 2019, average fee income grew by a more modest 3%. The growth was achieved primarily through an increase in fee earner headcount of 4%, offset by a fall in average chargeable hours of 2%. Fees per fee earner, a key metric for firms, actually fell by 1%.
In the final quarter, there was a notable variance in performance across the different size categories, with firms ranked 1-10 reporting the largest increase in fee income (4.5%), and firms ranked 26-50 the lowest (1%). In addition to having the largest fee income growth, the 1-10 size category was the only size category where firms achieved growth in fees per fee earner (2%) and an increase in chargeable hours per fee earner (0.6%).
Black added: “The strong year-on-year average fee growth comes despite a mixed performance across the different size categories in the final quarter of the financial year. Time will tell as to whether the more modest growth in this quarter is the start of a period of lower growth for the sector, or simply a dip prior to stronger growth in the year ahead.”