BENCHMARKING: survey finds partners at smaller regional firms outstrip those in London


Fee-earners in small and medium-sized law firms recorded a median increase in fee income of just 3% in the last 12 months - signalling an end to the rapid growth of the previous two years, research has revealed.



The annual benchmarking survey by the Law Society's law management section (LMS) found that the median revenue per fee-earner was £104,379. However, the rate of growth reported in the 2006 edition of the survey was 8.2% and in 2005 it was 5%.



The LMS research also pointed to a drop, for the second consecutive year, in the median fee income per partner, which fell 1.6% to £427,640.



Partners in regional firms - in particular the East Midlands, the east, Yorkshire and the north-east - were meanwhile found to have outperformed their counterparts in Greater London when it came to profits per equity partner.



A record 269 firms, 98% of which have 25 or fewer partners, took part in the survey.



Robert Mowbray, head of the solicitors group at accountants MacIntyre Hudson and one of the survey's authors, said a reason for London firms' under-performance was that they were not as highly geared in staffing as their regional counterparts.



He added: 'Some London firms have the attitude that their clients are only satisfied if they see a partner in person. As a consequence, they're allowing their partners to spend time on work that can't be charged out at partner rates, reducing income.'



Mr Mowbray urged delegates at the launch of the survey at the Law Society this week to take a long hard look at how their firms charged, their recovery rate and their gearing ratios. 'If you are underperforming in any of those areas, be bold and do something to address the problem,' he said.



LMS chairwoman Alison Downie, a partner at London human rights firm Bindman & Partners, said: 'At a time of major reform and with the opening up of the legal market place, firms need to concentrate more than ever on competitiveness and best practice.'



Alan Hodgart, a partner at management consultancy Kerma Partners, told the Gazette there had been a 'general softening' of the legal market, and that only firms with large corporate practices were continuing to see the strong growth of two years ago. However, he added that the statistics could be turned on their head by a firm's success.



He said: 'Growth and revenue can slow down when a firm has lots of good work in the pipeline and begins recruiting heavily and quickly. It takes time for the new recruits to get up to speed and start contributing profitably, while in the meantime they're showing on the books as non-productive overheads. As a result, firms that are actually doing very well can seem to be doing quite badly.'



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Jonathan Rayner