Over 80 per cent of City law firms have also outperformed their expectations for the year, as the legal sector emerges stronger after a year interrupted by lockdowns and restrictions, according to a new report.
The majority of City firms, at 91 per cent, enjoyed an increase in their profit pool and saw aggregate revenue growth of 7.2 per cent- almost double that of regional firms – according to the latest law firm benchmarking survey by advisory firm Crowe.
The report comes as revenue of the 100 biggest UK law firms was found to have grown by four per cent to £28.8bn in 2021, according to a separate study published last week.
TheCityUK’s annual report into the legal services sector found that revenue more than doubled over the past decade, with the biggest players netting £13.7bn in 2010.
The sector’s strong performance is expected to continue in the year ahead, according to the report as 90 per cent of City firms said the outlook for their firm was looking positive or very positive.
“The legal sector has shown resilience against the operational headwinds of the pandemic and the resultant economic uncertainty over the past year, and most firms have outperformed their previous projections,” said Louis Baker, Crowe head of professional practices.
Average profit per equity partner (PEP) also rose by 17 per cent for City firms and for half of the firms, the increase in PEP was over 10 per cent.
The numbers of partners, fee earners and support teams also grew across City firms over the last year, in a sign of demand for the sector.
But “the availability of people with the skills we need” was also noted as a business critical risk by more than two thirds of firms in the City.
The data comes after weeks of an escalating bidding war between City law firms for junior talent. In recent weeks ‘silver circle’ law firm Herbert Smith Freehills joined the clamour by raising newly qualified lawyer salaries to £105,000.
Magic circle law firm Clifford Chance also recently hiked starting salaries for newly qualified lawyers to £107,500.
“The current focus on people matters is just the tip of the iceberg,” warned Crowe partner Ross Prince. Recruitment and retention, he said, would be a key theme for firms into next year.