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RESULTS OF CROWE’S LAW FIRM BENCHMARKING SURVEY 2018 PROVIDE A SNAPSHOT OF THE UK LEGAL MARKET AS THE UK PREPARES FOR BREXIT
Regional law firms have fared better than expected in the past 12 months, according to national audit, tax, advisory and risk firm Crowe.
Crowe’s Law Firm Benchmarking Survey 2018 reveals that 71% of regional firms demonstrated revenue growth, with many enjoying improved profits.
Sue Daye,, Partner in Crowe’s Cheltenham office, said: “For many regional law firms, it has been an encouraging year, albeit it has been harder to sustain growth. Regional firms have sought to future-proof their businesses and, encouragingly, there seems to be an appetite to explore new technologies.
“Also of great interest is the pricing challenge with 84% of firms changing the way they price work, and 13% reporting a significant change in approach. We see this trend continuing into the immediate future as a key ingredient to a firm’s competitiveness and profitability.”
Across the UK, many firms continued to successfully convert turnover growth into profit, with profit per equity partner (PEP) increasing for almost two thirds of participating firms – an increase from 60% in 2017 – and 35% of London firms and 46% of regional firms reporting an increase of more than 10%.
However, 2018 has been a challenging year for the legal market. This was reflected with almost 30% of regional firms and 10% of London firms experiencing a fall in revenue – compared to 20% and 8% last year, respectively – and a slowing in the overall pace of growth.
With fierce competition for the best talent, staffing has played a pivotal role in most firms’ plans for 2018. Almost 70% of firms increased their headcount this year with the industry citing a competitive remuneration package, career progression and strong brand reputation as the top three factors to attract and retain talent.
What lies ahead?
Brexit remains a top concern for the industry with London firms remaining the most cautious of the potential outcome; 56% of London participants viewed it as a threat to business and only 6% believed it offered a positive opportunity. Regional firms are also becoming increasingly nervous, with 20% of regional participants feeling that the business threat presented by the UK leaving the European Union has increased since last year.
Last year both London and regional firms identified other non-lawyer firms as a worrying threat to market share and 55% of London firms believe this threat has increased over the past 12 months. In contrast, regional firms remain less wary with 48% stating the threat level has not changed in the last year.
Looking further ahead, the industry was united in its view on the benefits of AI, with the majority viewing it as an opportunity to streamline their less technical operational areas and straightforward legal functions, for example document generation and review.
Louis Baker, Head of Professional Practices at Crowe, said “Understandably, uncertainty remains the key word in the industry this year.
“Given the protracted Brexit negotiations, this is not unsurprising; indeed, with the series of European leader summits lined up between now and the New Year, many firms may not have firm plans for the next month, let alone beyond that.
“This uncertainty appears to have encouraged most firms to focus on what they do best. The majority of participants are basing future growth expectations on expanding their existing market, rather than diversifying into new types of work.
“Despite all of this, most firms have shown themselves to be in good financial health, and one area they have felt confident about is staffing and recruitment, with more than two-thirds of firms increasing headcount. They may not know what the future holds, but they know they will be busy regardless.”