Alternative business structure status remains of interest only to a minority of big firms as a way of building business, according to a long-established annual snapshot.
In the Law Firms Survey 2012, compiled by consultancy PwC, 11% of top-100 firms see ABS status as one of the best opportunities in the next 12 months, against 73% citing better penetration of existing markets and 42% new geographic markets.
Reinforcing previous concerns about the overheads of the biggest firms, the survey finds that the top 10 have a highest ratio of non-fee-earners to fee-earners. This indicates that economies of scale ‘are less significant than smaller rivals might think’.
The survey notes that ‘the greater complexity of work undertaken by the largest firms, and perhaps their tendency to "gold-plate" services to fee-earners and clients alike, clearly demand additional back office support’.
Overall, the survey concludes that the UK legal sector had a tough year with the majority of law firms reporting flat income growth. While 82% of firms surveyed increased UK fee income this year, much of the growth was due to acquisitions. ‘Once inflation is taken into account, performance was broadly flat for the majority of firms.’
Other findings from the survey, now in its 21st year, include:
- Headcount has remained stable in the top 10, while firms outside this ranking have reduced the number of equity partners and fee earners.
- Legal process outsourcing/offshoring is expected to become increasingly important, as pricing pressures and the threat of new entrants combine to force firms to reappraise how they operate.
- Managing working capital presents an increasing challenge. Lock-up has deteriorated across all bandings, largely driven by lengthening work in progress days.