Legal Services
Law firms face a rocky year thanks to economic uncertainty and a drop in business confidence, a survey of the ’s top 100 firms shows. The research, carried out for accountancy firm, Smith & Williamson, shows firms face increased pressure on costs and flatter income levels. Giles Murphy, head of assurance and business services at Smith & Williamson, says that while the overall outlook for law firms remains healthy, the market seems to have peaked.
“Many practices are grappling with increasing costs as they have had to ramp up salaries to get the people they need while also dealing with rising property costs. At the same time, income levels are flattening. Although the percentage changes for costs and revenue may be quite small, the combination of the two can have dramatic implications for profits.” He says practices relying on merger and acquisition and transaction work look most vulnerable, while those focusing on litigation, private client, arbitration or insolvency will fare better.
The trend towards increased consolidation is apparently continuing, with a third of firms questioned scrambling to find other firms to hook up with. Murphy says: “The main motivating factors are to forge links with a firm with complementary areas of activity, to grow the client base, and as a means to develop specific sectors.” The need to recruit and retain quality staff was cited as an area of concern by over half of participants. “The problem is primarily a lack of talented people rather than the lack of numbers, and this pressure on recruitment tends to force up payroll overheads. For those firms who have been investing in new talent, the economic uncertainty could not have come at a worse time,” says Murphy.
