The panel surveys of solicitors' firms were set up by the Law Society's research and policy planning unit (RPPU) to collect reliable data on the structure, organisation and finances of private practice firms.

The results of the surveys will be published annually.

By looking at private practice in more detail than has previously been possible, the aim is to build up a solid foundation of data about the profession and to chart over time the changes taking place within it.For the first year of the study, a total of 511 private practice firms, ranging in size from sole practitioners to firms with 25 partners, were recruited to the panel .

They agreed to serve on it for up to three years, completing questionnaires twice yearly.

Surveys were carried out in the autumn of 1994 and the spring of 1995 and achieved response rates of 80% and 73% respectively.

In presenting the results, firms have been divided into four size bands: sole practitioners; two to four partner firms; five to ten partner firms; and 11 to 25 partner firms.Analysis of the panel survey data for 1994/95 confirmed that firms which derived 40% or more of their fee income from legal aid had staffing ratios different from firms which did little or no legal aid work.

For example, in those firms that relied most heavily on legal aid, the ratio of assistant solicitors to equity partners was slightly higher and the ratio of paralegals to solicitors was markedly higher.

In contrast, the ratio of non fee-earners to fee-earners was lower, confirming the hypothesis that firms that do most legal aid work employ fewer support staff.There have been changes over the last five years in the proportion of fee income that firms derive from different types of work.

The panel survey results show that in the case of conveyancing, the proportion of fee income from commercial conveyancing almost halved for firms in each size band, while that from residential conveyancing declined from 33% to 21% for two to four partner firms and from 29% to 16% for five to ten partner firms.

However, residential conveyancing remains a very important source of fee income for the smaller firms; the panel survey showed that it accounted for around a third of the fee income of sole practitioners and a fifth of the fee income of two to four partner firms.The panel survey, when compared with the earlier 1989 survey (which asked similar questions o f over 600 private practice firms), also allows an analysis of changes in the proportion of fee income that firms receive from different types of client.

The major changes in this area include the increased importance of legally aided clients to the profession.

The proportion of total fees earned from this source rose from 9% to 18% over the five-year period.

Balancing this increase was the reduction in importance of fees received from private individuals, which fell from 41% to 37% of the total, along with the much more substantial decrease in fees from private sector firms.

The latter fell by a quarter from 44% to 33% of the total.The panel study collected data on the income and costs of private practice firms and includes one of the most valuable financial performance indicators for firms _ that of profit per equity partner.

The survey showed that profit per equity partner increased with size of firm.The median profit per equity partner for sole practitioners was £29,000; that in two to four partner firms was £44,000; in five to ten partner firms, £56,000; and in 11 to 25 partner firms, £61,000.

Some firms achieved profits significantly higher than this and the median profit per equity partner in the highest earning 11 to 25 partner firms was £90,000.

While these firms were clearly doing well, not all were as fortunate and the median profit in the lowest earning firms with two to four and five to ten partners was £24,000 and £38,000 or less, respectively.The panel survey results can also be analysed by region.

The regional analysis of profit per equity partner showed that there was little difference between firms in the north and the south, where the median profit per equity partner was £41,000 and £42,000 respectively.

In the Midlands/Wales region this measure of profit was about 10% higher and stood at £45,000 per annum.

The region with the highest median profit per equity partner was, not unexpectedly, London, where the figure was £52,000.

This indicates that the London firms on the panel generated a level of profit per equity partner which was between 16% and 27% higher than firms in other areas.One would expect that the level of profits per equity partner would fall as the proportion of legal aid income increased.

In fact, the picture which emerged from the panel survey was less straightforward.

Among those firms undertaking legal aid work, the firms which performed best were those which 'topped up' their private client work with a limited amount of legal aid work (between 1% and 10% of gross fee income).

The median profit per equity partner for these firms was £52,000.

Another group performing well included those firms doing significant amounts of legal aid work (between 26% and 40% of gross fee income).

These firms, which may have tailored their operating systems to accommodate their tighter margins, produced median profits of £47,000.The firms with the lowest profits per equity partner (£40,000) were those which derived between 11% and 25% of their fees from legal aid.

For these firms, setting up specialised systems may not have been an option.

The other group with lower profits (£42,000 per equity partner) were those firms which derived more than 40% of their fee income from legal aid and which were therefore most reliant on this type of client.For example, the panel survey provides rather depressing findings about the progress of women; it confirms that while women are progressing to salaried partner level, there are still relatively few achieving equity partnership.

Just over two-thirds of firm s had no female equity partner; a proportion which had not changed since the RPPU conducted its first survey of private practice firms in 1989.

In a quarter of firms on the panel there was one female equity partner but very few firms had more than one.Firms also remain traditional in that only 3% of both the male and female solicitors in the panel firms worked part-time.

Very few are taking advantage of a working practice that would enable solicitors of either gender to combine work with other responsibilities.There are clear political indications that the market for legal services is entering a period of change and the panel survey has begun to monitor the extent to which solicitors are acquiring new skills in the face of change.

At this early stage, only 5% of firms on the panel included solicitors who had completed formal training in family mediation; these were more likely to be firms with more than five partners.

An even smaller proportion of firms employed solicitors trained as arbitrators or as mediators in civil disputes.The panel survey results have been put to practical use by firms to compare their performance with that of other, similar firms.

The information has also been used by the Society.

It has been included in a presentation to the Master of the Rolls, has been used in the evaluation of the new legal practice course and to monitor the market for advocacy.SURVEY FINDINGS 1994/95-- Only 3% of both male and female solicitors worked part time.-- In 68% of firms there were no female equity partners.-- London firms employed more salaried partners, assistant solicitors and trainees but fewer paralegals and secretarial staff.-- Firms which did most legal aid work relied more heavily on assistant solicitors and paralegals and employed fewer support staff.-- Only 2% of firms on the panel included solicitor advocates.-- Only 5% of firms included solicitors who had completed formal training in family mediation.-- Only 39% of the sole practitioner firms produced an annual budget and 35% a cash-flow forecast.

Of the two to four partner firms, 61% produced an annual budget and 50% a cash-flow forecast.

For the five to ten partner firms the equivalent figures were 85% and 72%.-- Some 58% of firms had a written client care policy.-- Only one-half of sole practitioners, two-thirds of two to four partner firms and three-quarters of five to ten partner firms had complied with practice rule 15.-- The Society's practice management standards had been implemented by only a fifth of firms.-- Only 12% of the firms had obtained a legal aid franchise.-- Revenue per equity partner increased with size of the firm.

The median for sole practitioners was £74,000; for equity partners in two to four partner firms it was £145,000; in five to ten partner firms it was £188,000 and in 11 to 25 partner firms it was £252,000.SURVEY FINDINGS 1994/95-- Comparisons with a 1989 survey of firms showed that the proportion of fee income from commercial property had declined greatly over the intervening five years.-- Since 1989, residential conveyancing had declined as a source of fee income: from 33% to 21% for two to four partner firms and from 29% to 16% for five to ten partner firms.-- For two to four partner firms, legally aided work represented around 40% of the total work billed to individuals; for five to ten partner firms this proportion was 31%.-- Profits per firm increased with size of firm and for sole practitioners the median profits were £29,000; for two to four partner firms they were £95,000; for five to ten partner firms they were £292,000; and for 11 to 25 partner firms they were £631,000.-- In the top 25% of firms profits per equity partner were at least £53,000 for sole practitioners; £67,000 in two to four partner firms; £80,000 in five to ten partner firms; and £90,000 in11 to 25 partner firms.-- In a quarter of two to four partner firms profits per equity partner were £24,000 or less; and in a quarter of five to ten partner firms they were £38,000 or less.-- Firms considered that the most profitable types of work were (in order) commercial work, wills and probate and personal injury.

They regarded criminal cases, personal debt, consumer problems and welfare benefits as the least profitable areas of work.