Small to medium-sized law firms axed nearly one in 10 staff as the recession bit and profit per equity partner plunged by a quarter, new research shows. However, market conditions have improved in recent months, with firms starting to hire again and revenues expected to remain stable in 2010.

These are among the ­findings of the 10th annual LMS Financial Benchmarking Survey, published by the Law Society’s Law Management Section in association with accountancy firm Hazlewoods. Some 185 firms with average fee income of £3.8m responded to the ‘health check’, which this year includes annual comparators.

In 2008/09, median practice fee income fell by 6.5% on the previous financial year. Residential conveyancing predictably suffered most, contributing just 9% of total income by specialism compared with 22% in 2007. The total share of the ­revenue pie contributed by ­personal injury and clinical ­negligence declined by a third over the same period, from 21% to 14%.

Respondent firms reported total redundancy costs of £4m paid to more than 1,000 people – about 9% of the workforce.

Profits fell sharply across the board, as practices struggled with the costs associated with slashing overheads while coping with lower income. Median net profit per equity partner fell 24% to £86,960.

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