PwC: Another tough year for UK law firms

By Rob Starr, Content Manager Big4.com

According to the latest annual survey of the Top 100 law firms from PwC,  the Top 10 firms accounted for around 44% of total fee income across the Top 100, reinforcing their dominance of the UK legal market. These larger firms continue to record significantly better UK results than the competition across all financial measures. At net profit margin level, there is now an 11% gap on average between the Top 10 and the next 15 firms. Outside the Top 10, an average margin difference of only 2.4% separates the rest of the Top 100 firms.

The PwC survey notes that firms remain a long way short of the levels of performance they saw at the peak of the market back in 2008. For the Top 100 in real terms average UK fees per partner have fallen 22% in four years to £2.5 million. Average PEP is also down 24% to £951,000, despite a 6% drop in equity numbers over the four years. Firms in the 11-25 bracket have suffered the greatest proportional fall in PEP – an average of 31% – to £481,000 and this is further flattered by an average decrease of 20% in equity partner headcount over the same four year period.

David Snell, partner and leader of the professional partnerships advisory group, PwC commented:

“Continued focus on cost reduction and innovative delivery is required across all firms to maintain profitability in a highly competitive UK market. At the same time international; expansion into the emerging markets offers an opportunity for revenue growth for firms that have the scale and appetite to compete on a global playing field,” he said. “Looking ahead, firms are less confident than they were a year ago about the prospects for growth in the legal sector in the next three years, although about half of the Top 50 firms believe they will outperform the market for the period to 2015. There is a general view that the next 12 months will continue to be challenging, with some firms in the 11-25 rankings, in particular, acknowledging the challenges of an increasingly mature market and recognising further consolidation in the mid-tier is likely.”