Four-fifths of law firms outperformed expectations during the pandemic, according to an annual snapshot on the UK legal market published today.
Crowe’s Law Firm Benchmarking Survey 2021 reveals that 81% of firms exceeded their expectations for the 2020/21 financial year, with 85% of City firms and 77% of regional firms doing better than they expected.
The survey also finds that 91% of City firms and 75% of regional firms reported an increase in their profit pool. Average profit per equity partner went up by 17% to £485,000 for City firms, while the same figure went up by 28% for regional firms to £285,000.
The legal sector showed ‘reassuringly positive’ revenues with an aggregate growth of 5.9% throughout the first year of the pandemic. City firms led the way, with aggregate revenue growth of 7.2% compared with 3.8% for regional firms.
The aggregate figure of 5.9% is lower than the 6.7% increase for 2019/20 but nonetheless ‘demonstrates just how resilient the UK legal market is’, according to the survey of 50 law firms – 26 City firms and 24 regional firms – with financial years ending in early 2021.
The report states: ‘There is, of course, a link between those firms who grew their revenue and those who grew their profits but it is also clear that cost control has been a big part of the 2020/21 financial year and the greatest impact of this is seen in the regions.
‘The question is, how many of the savings are “windfall” and unsustainable to carry forward in future years, and how many are due to the adoption of improved working practices which have now been permanently embedded?’
The survey also showed ‘a very different approach’ to headcounts as between City and regional firms: City firms’ headcount ‘grew across all headline categories – partners, fee earners and support teams – in stark contrast to their regional counterparts, where employee headcount has fallen’.
Looking to the coming year, 90% of City firms and 82% of regional firms said their outlook was positive, while more than 70% of all respondents said the outlook for the UK legal market was also positive – significantly more than those who were positive about the UK economy as a whole.
Three-quarters of participants also identified updating existing ‘agile working practices’ as part of their plans for the next 12 to 18 months, while 80% predicted that ‘price competition in the legal sector will increase significantly’.