Small and medium-sized law firms are enjoying “sustained economic improvement” but have room to boost profitability, according to a Natwest/ RBS bellwether report.
The annual report, Financial Benchmarking Report, is based on contributions from 339 firms with fee income of up to £35m, using figures from their financial year end in 2014. Profits rose on average by 8%, and median profit per equity partner rose £20,000 on last year’s report to £107,000.
The report found the increase was due to staff recruitment. The median fee per equity partner was £473,000. The median fee per fee earner was £138,000, just £2,000 more than last year. However, firms were less confident on profit margins, with 40% predicting these would remain unchanged or fall.
Steve Arundale, head of professional services at Natwest and RBS, said: “Improved revenue and profit levels are welcome but profit margin overall remains flat suggesting that improved efficiency was not a business focus in 2014, with many firms stretched and challenged to cope with increased instruction levels.
“It is key that firms manage their business processes to become as efficient as possible in order to maintain or improve profitability. The report also shows optimism for the next 12 months.”
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