Law firms in the City have weathered tough economic and political conditions to post growth overtaking that of regional firms, according to national audit, tax and advisory firm Crowe Clark Whitehill.
The company's annual law firm benchmarking report found that 92 per cent of City law firms experienced growth this year, up 27 per cent on 2016. The number of companies reporting a fall in revenue had also dropped from 23 per cent last year to eight per cent.
Regional law firms had a more difficult period though. While 80 per cent reported growth in 2017, only 28 per cent said revenues had increased by more than 10 per cent, compared to a third of firms in 2016, and over half in 2015.
Many firms were successful at converting turnover growth into profit, with profit per equity partner rising for 60 per cent of companies, including nearly 70 per cent of City firms.
Steve Gale, partner in Crowe’s London office, said: "The ability of firms to convert turnover growth into profit has been encouraging. Overall, City firms have had a better year than in 2016, with only eight per cent reporting a fall in revenue compared to 23 per cent last year."
City firms cited Brexit, government policy and the regulatory environment as their main concerns going forward. Nearly half of the companies anticipated Brexit as a net threat, though just under half of regional firms said they felt Brexit will have little impact on them.
Louis Baker, head of professional practices at Crowe, said:
City firms are understandably worried about the continuing political and economic uncertainty, with a quarter of City firms viewing Brexit as the biggest challenge to their future success, and nearly half citing it as a ‘net threat’.
Grappling with fierce price competition – including the threat of new market entrants, particularly the encroachment of other professional services firms into legal services – is also a key worry for City lawyers, while regional firms are more concerned about the talent pool, harbouring fears over the availability of high quality personnel.
Despite staffing concerns, average headcount did continue to rise, for both City and regional firms, with the City out ahead, posting a 7.5 per cent rise in fee earner numbers.