An increasing number of big firms expect to cut unprofitable services in the near future, according to a survey of the top 100.

Some 42% of finance directors have said it is ‘likely’ they will cut unprofitable services over the next 12 months, up from 17% two years ago, according to research from Thomson Reuters UK Legal. 

Public sector, personal injury and private finance initiative (PFI) projects were all named as the areas most likely to shrink.

To compensate for the closure of struggling service lines, many firms said they will expand into new growth areas, including regulatory and compliance work, energy, restructuring and insolvency, and construction work.

One-third of firms also plan to expand overseas, up from just 13% two years ago.

‘The recent recovery in M&A activity, IPOs and corporate finance work is still not enough for some firms to avoid tough decisions about underperforming practice areas,’ said Sam Steer, head of large law segment for Thomson Reuters’ UK Legal business.

‘At the same time, law firms recognise the critical importance of building up their core practice areas and moving into new service lines that are doing well, and where they expect to capitalise on growth potential.’

Downward pressure on fees from clients remains the biggest threat to law firm profitability, with 76% believing this represents a ‘high risk’.

However, 79% said they will not be imposing freezes or cuts to lawyers’ pay or bonuses in the coming year. Nearly two-thirds of respondents said redundancies are ‘unlikely’ in the next year.