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Better times arrive for law firms

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Legal firms in East Anglia are continuing to see an improvement in their fortunes and signs of growth, according to a Law Society annual profitability survey. It shows that practice fee income for legal firms increased by one per cent in 2011, after a rise of 0.2 per cent in 2010 and a 6.5 per cent drop in 2009. The survey, sponsored by Lloyds TSB Commercial, showed that average net profit per equity partner increased from £112,549 to £114,853.

Law Society President John Wotton said: "The LMS Financial Benchmarking Survey and the support that LMS provides to its members have had a key role to play in helping practices emerge from the recession through effective management.

"Now, LMS has added importance in light of changes to the legal services market. With more competition emerging and more opportunities for practices as a result of the changes under the Legal Services Act, a robust management system is critical for any law firm looking to attract external investment or remain competitive."

Now in its 12th year, the survey, which is produced in association with Hazlewoods LLP, a medium-sized, niche accountancy practice specialising in advising the legal profession, is widely regarded as the annual financial health check, particularly for the smaller end of the legal profession.

Keith Beevor, senior manager, specialist markets for Lloyds TSB Commercial in East Anglia, said: “This year’s survey shows admirable resilience on the part of solicitors. Fee income rose slightly against difficult economic conditions, while median net profit increased by two per cent – a modest rise, but nevertheless building on last year’s improvement.

“Last year’s respondents predicted that income growth might be around one per cent and they were spot on. This year, they are forecasting three per cent growth, so hopefully there are better times ahead. Respondents again commented positively on the support provided by their bank and this is pleasing. This is a key focus for Lloyds TSB Commercial and latest figures show that we have achieved a growth in lending to the sector of five per cent in the past year*.”

In light of these results, it has never been more important for legal firms to work with a bank that truly understands their profession. Keith Beevor, Lloyds TSB Commercial continues: "Our specialist relationship managers are trained by the Law Society as Lexcel Consultants and they have a sound understanding of the issues and challenges that legal practices are currently facing. They are determined to work with our solicitor customers to provide relevant support and guidance to help ensure that they are well equipped for success in 2012 and beyond.”

Other key findings from the survey included:

  • The number of support staff per fee earner decreased from 0.65 to 0.61, an average saving per fee earner of £821.
  • The survey’s 181 participants reported total recruitment costs of £2,775,770 paid to recruit 1,050 people. This is about 11 per cent of the reported workforce, and runs ahead of the £2.1million and 8 per cent in the 2010 survey.
  • The median spend on non-salary overheads per fee earner was £38,142 compared with £37,163 in 2010, an increase of 2.6 per cent.

The survey helps firms plan for future financial objectives; big profit increases require detailed understanding of financial performance. Benchmarking against other firms helps firms face up to the challenges of the new legal services environment, and consider the benefits of external investment.

Last Updated ( Friday, 08 June 2012 08:09 )