By Daniel Hunter
The UK’s top 100 law firms have achieved double digit growth for the first time in five years, according to the latest quarterly legal sector survey from Deloitte.
The survey showed a 10.5% increase in fee income generated in Q1 (quarter ended 31 July 2013), compared with the same period last year (quarter ended 31 July 2012). The growth was boosted by mergers within the sector, which accounted for approximately half of the fee income increase with the balance due to an increase in general market activity.
Growth in the ’26-50’ and ’51-100’ size categories where most law firm transaction activity occurred reached 14.6% and 13.4% respectively. However, growth by fees per fee earner was more modest (3.5% for the ’26-50’ category and 2.3% for the ’51-100’ category), whilst chargeable hours per fee earner remained relatively flat in comparison with last year (0.3% for the ’26-50’ category and 1.2% for the ’51-100’ category).
“This has been a very positive quarter for law firms with the sector achieving underlying growth averaging around 5%. Firms’ property and corporate departments have generally had strong quarters with the more positive macroeconomic environment feeding through to higher levels of activity," Jeremy Black, partner in Deloitte’s professional services practice, said.
“Merger activity continues apace, particularly in the volume space and outside of London where markets remain tough and law firms continue to face a number of challenges. Consolidation outside the top 25 firms has led to significant growth in average fee income and fee earner headcount. However, chargeable hours and fees per fee earner remain largely unaffected demonstrating continued pressure on firms’ business model.”
Law firms are becoming more confident about the outlook for the coming financial year, forecasting an average fee income increase of 5.1% for FY14, with an increase of 4.2% for the next quarter.
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