Lawyers in the UK risk being left twiddling their thumbs, as US and new firms increase competition and put a squeeze on top and bottom lines, a report out today has found.
Only three-quarters (75 per cent) of the Top 100 UK law firms reported revenue growth this year, according to figures from PwC, down from eight out of ten (82 per cent) in 2015, while average profit margins have fallen.
The less lucrative marketplace will be a particularly harsh blow to new hires. Firms have been on a hiring spree, with the top 50 boosting their fee earner headcount by 7.6 per cent on average over the course of the year.
"As confidence returned to the sector last year, firms increased headcount in anticipation of continued improving market conditions," explained David Snell, partner and leader of PwC's law firms advisory group. "However, with the market turning out to be more challenging than expected and with increased competition from US firms and new entrants, spare capacity is now an issue for firms."
According to PwC's report, UK firms are struggling to keep pace with their US counterparts. While profits per fee earner at UK top tier firms fell by 2.6 per cent, the same metric grew by 2.8 per cent at US top tier firms.
Snell continued: "Despite partner numbers being tightly controlled, spare capacity has increased and is a cause for concern, particularly with the increased uncertainty around Brexit. Workforce management and deployment has remained unchanged for many years and we expect the better performing firms in the future will be those who can improve the agility of their workforce both between practice areas and globally.
"One issue law firms can’t ignore is the need to invest heavily in technology, both to replace old systems and invest in emerging technologies such as Artificial Intelligence (AI). The successful firms of the future are likely to provide global services supported by virtual collaboration and widespread use of AI."