Fee income is up, profits are up, and lockup and borrowings are stable.

That is the overwhelmingly positive message of a respected annual bellwether of small and medium-sized law firm performance, published today.

Figures from the Law Society Law Management Section’s 2018 Financial Benchmarking Survey show that total fee income has risen for the eighth year running, with a median rise of 5.3%. All regions reported growth across all sizes of practice. Most worktypes saw a rise, with the predictable exception of personal injury.

Median fee income per equity partner rose once again, by 8.6% to £684,000. This was mainly attributable to a rise in fees per fee-earner, as the ratio of fee-earners to partners was little changed at 5.5 to 1.

Median profit per equity partner climbed 6.9% (against 8.4% last time) to £162,161, with firms reporting tight control of IT, indemnity insurance and accommodation overheads. Retention and recruitment pressures helped push up the median cost of a fee-earner by 2.2% to £48,787.

Cashflow continues to improve for many practices, aided by lockup which is down by a median five days. Many practices made efforts to retain more cash in the practice, which the report speculates could be in preparation for Brexit-related turbulence and further reform of the sector.

Paul McCluskey, head of professional practices at survey sponsor Lloyds Bank Commercial Banking, welcomed evidence that firms are getting a grip on costs. But he sounded a warning on the number of practices where partner  drawings exceeded profit, with 15% reporting that this had happened for two consecutive years (up from 9% last time).

‘I encourage managing partners to take a hard stance against this culture,’ said McCluskey, pointing out that it weakens firms.

The survey report, written by Hazlewoods Accountants, is free to download.