GROWTH: fee income and profits per partner widen the gulf


Overall fee income and profits per partner continued to rise at the UK's top law firms over the last year, with the top-ten practices reporting increases of more than 10%.



In its 16th annual UK law firm survey, PricewaterhouseCoopers (PwC) found that growth within the top-ten firms was particularly strong. Among the top 11 to 25 firms, 65% recorded growth in profits per partner of 10% or more, down from 75% last year.



The top ten firms posted average profits per partner of £866,000 in 2006/07 compared to £781,000 last year. The 2006/07 figure for the 11-25 group was £497,000 compared to £478,000 in 2005/06.



Alistair Rose, leader of PwC's professional partnership advisory group, said: 'The top-ten firms are beginning to establish clear water between themselves and other firms, both in financial performance and utilisation.'



He said managing equity partner numbers continued to be a key driver of the level of profit. Three of the nine top-ten firms surveyed increased equity partner numbers, while 58% of the 11-25 group did so.



For the first time, PwC looked at the relationship between retention and chargeable hours, finding that firms with the highest chargeable hours also had the highest turnover rates - sometimes above 20%.



'If you are losing good-quality people, costs go with that,' Mr Rose said. 'If firms can crack the retention issue, there is a chance to improve profitability.' He added that the trend of cutting partnership numbers might also be exacerbating retention issues.



The survey said the top 11-25 firms are finding life difficult in an increasingly competitive market partly because they were unable to bring about the economies of scale much larger practices can achieve.



Anita Rice