Commercial law firms see downward pressure on fees as the greatest threat to their profitability in the year ahead, research has revealed.

A survey of finance directors at the top 100 law firms, commissioned by publisher Sweet & Maxwell, showed that 60% thought fee pressure would pose a ‘significant’ risk to profitability in 2010, while 40% said it would pose a ‘medium’ risk.

Respondents said the recession had prompted the first real efforts from clients to negotiate down hourly rates.

The research also showed that firms have attempted to defend their rates by offering added-value services, such as on-site legal training.

The survey indicated that fear over a continued downturn in corporate work has subsided considerably, with just 37% of finance directors viewing this as a significant risk, compared to 72% last year.

However, 57% of law firm finance directors said they were ‘moderately’ concerned that a slow recovery in mergers and acquisitions work could harm their profitability.