Large law firms have ‘weathered the storm’ of the recession, with profits up sharply since the start of the year, research by PricewaterhouseCoopers seen exclusively by the Gazette has revealed.

PwC’s quarterly benchmarking survey showed an 18% rise in profits per equity partner (PEP) since January at the 10 largest firms, and a 41% surge at the top 11 to 25 firms. Profit margins also saw a boost in firms of all sizes.

Commentators said firms were finally reaping the rewards of staff cuts and were seeing an increase in the volume of work.

In the three months to 31 July, equity partners at the top-10 firms earned average profits of £181,000, up from £154,000 in the first quarter to 31 January. PEP in the top 11 to 25 firms rose from £56,000 in the first quarter, to £79,000 in the July quarter.

Firms throughout the top 100 saw a rise in profit margins, which soared by 36% at the top-10 firms, and rose by almost a third at the top-25 firms.

The average number of fee-earners and support staff fell across firms of all sizes compared with the January quarter. Meanwhile, chargeable hours rose across all firms, with a 19% rise in the top-10 firms, indicating an increase in the volume of work.

David Thurkettle, a senior director in PwC’s professional partnerships group, said there were ‘very early signs of ­optimism’ for legal practices. He added: ‘Firms have weathered the storm in the main. They have got through the cost and the financial pain, and are now reaping the rewards… The view here is that, if you took a basket of different law firms, most of them are over the worst in terms of activity levels.’

However, he added: ‘There are certain practice areas that are still at risk. In mergers and acquisitions and corporate services, the optimism is better placed. But in real estate, it may take longer and there is still a risk that things are not really going to return.’

Law firm management consultant Nick Jarrett-Kerr said: ‘We are all hardly daring to say it, but things are getting better’.

The research included responses from more than 50 law firms, including eight of the top 10.