A spate of mergers and lateral hires helped push fee income at top-100 law firms up 6.3% in the year ending 2015, with firms forecast to continue to outperform the UK economy in the year ahead, according to a regular market survey.
However rising costs could threaten increases in profitability.
Research by accountants Deloitte as part of its quarterly legal sector survey also showed that fee income rose 6.7% in the last quarter of the year, compared with the same period in 2014.
Firms with a predominantly London focus outperformed those dealing with UK markets outside London or internationally.
‘Firms with a more global footprint have faced a particularly challenging year, with the economic environment in certain overseas jurisdictions proving especially difficult,’ Jeremy Black, partner at Deloitte’s professional service practice, said.
Firms ranked in the top 50 saw the strongest performance, with fees for those ranked 26-50 rising 6.9% for the year.
Mergers helped to drive fee income growth for firms ranked 51-100, but the tough market meant average fees per fee-earner grew by less than 1%.
Law firms expect growth to continue in the next financial year, with average growth predicted at 5.3% for 2016.
The positive outlook comes as top firms announce pay hikes for trainee and associates.
This week magic circle firm Clifford Chance revealed a salary increase of up to 5% for associates, starting at £70,000 for newly qualifieds rising up to £98,500 for those with three years’ PQE. Trainees meanwhile enjoyed a £1,500 increase to £42,000, placing the firm alongside Linklaters at the top of the table for trainee wages among City firms.
Meanwhile US firm Akin Gump Hauer Feld has announced that it is raising pay for newly qualified solicitors to £100,000, and lifting trainee salaries up 7.5% to £43,000.
Black added: ‘As far as fee income is concerned, firms remain confident in their outlook for the year ahead, predicting growth rates which will outperform those of the UK economy. However, many are increasingly concerned that rising costs could make it difficult for firms to increase their profitability this year.'