Compelling new evidence is published today showing that small and medium-sized law firms are trading more strongly than at any time since the financial crisis of 2007/08.
Seven out of 10 SME practices expect profits to grow in 2015 after a buoyant 2014, according to market bellwether The NatWest/RBS Financial Benchmarking Report.
Corporate work has surged and conveyancing is at a 10-year high.
Median profit per equity partner at the 339 practices surveyed soared by £20,000 in 2014 to £107,000. Firm profits rose by an average of 8% and fees by 5% (up from 3% in 2013).
Four out of five firms expect fee income to rise this year, though profit margin appears a tougher nut to crack. Some 40% of firms believe margins will remain unchanged or fall.
The survey covers firms with annual income below £35m – nearly half reported revenues of under £1.5m.
‘2014 was a year of sustained economic improvement,’ said Steve Arundale, head of commercial professional sectors at NatWest. ‘Legal firms witnessed an increase in matter starts associated with corporate work and residential property.’
Separately, the first edition of the Conveyancing Market Tracker from search provider Search Acumen reveals that firms which rode out the recession are reaping rewards from the consolidation which ensued. The average number of transactions per firm hit a 10-year high in 2014, even though activity was down 23% on 2007. With nearly a quarter of firms exiting the market over that seven-year period, the survivors conducted 33% more transactions.
The five biggest firms enjoyed the largest percentage increase in transaction volumes since 2007, with their collective market share doubling to 6%.
The tracker draws on 10 years of Land Registry data and gauges the outlook for growth. It reveals that the total number of firms active in the market last year (5,871) was 24% down on the 7,733 active in 2007.