Slower economic growth in established markets will restrict fee growth among City law firms in 2013/14, according to lobby group TheCityUK’s Legal Services 2014 report.
Emerging markets will offer potentially richer pickings, it predicts.
The report, published today, presents evidence that the UK is the world’s leading centre for international legal services, though New York has the bigger domestic market.
The UK accounts for around 7% of global law firms’ fee revenue, by far the largest market in Europe. The UK can boast three of the five largest global law firms by headcount and four of the top ten by revenue.
The largest law firms in London also have more lawyers overseas (typically between 45% and 65% of practitioners) and a bigger international network than most US law firms, the report adds.
The value of the legal services sector to the UK economy has increased from £15.8bn in 2002 to £20.4bn (1.5% of GDP) in 2012, with the positive contribution to the UK’s balance of payments nearly doubling in the same period to approaching £3bn.
Gross fees generated by law firms in the UK increased by 5% in 2012/2013 to £28.5bn, though many firms experienced marginal real growth after inflation. Revenue per lawyer among the top 100 dipped 2% in 2012/13 to £312,000, while profits per lawyer also fell by 2%, to £95,000.
The report notes: ‘Law firms are continuing to maintain tight control over costs by measures such as reducing the number of employees, freezing salaries, moving lawyers between practice areas, tightening management controls and moving parts of support functions in IT and accounting to more cost-effective locations including regional centres such as Glasgow and Belfast.’
Some 316,000 people were employed in legal services in 2012 - including 130,000 solicitors and 16,000 barristers and advocates - of whom 103,000 were in London.
London is the world’s leading centre for all forms of dispute resolution, says the report – 40% of governing law in all global corporate arbitrations is English law and London is considered the leading preferred centre of arbitration.
The total number of commercial and civil disputes resolved through dispute resolution in London increased by around 3% in 2012 to over 19,000. Around 4,700 of these were international disputes.
Chris Cummings, chief executive of TheCityUK, commented: ‘Legal services are one of the UK’s leading exports. They provide vital support to UK and multinational firms across all sectors with legal services being particularly critical when developing a presence in new international markets and structuring multi-jurisdictional projects.’
Law Society chief executive Desmond Hudson commented: ‘The importance of high-quality legal advice has long been recognised as central to all financial and business transactions. Lawyers play a critical part in economic growth.
‘To remain the destination of choice for legal services, we need to invest in infrastructure, invest in skills and reduce the regulatory burden.’
Nicholas Lavender QC, chairman of the Bar Council said: ‘Once again, these figures demonstrate how important the UK’s legal services sector is to our economy and to the economic recovery.’