Business confidence remains high but lawyers sound note of caution
Lawyers divide into bulls and bears as more predict surging growth, while others warn of stalled revenue. Charlotte Edmond reports on the latest quarterly Big Question business confidence poll
September 27, 2006 at 08:03 PM
3 minute read
A strong run of transactions since the summer has helped raise top-tier business confidence at the UK's top commercial law firms for the fifth time in six quarters, although overall confidence appears to be wavering.
The quarterly Legal Week/ EJ Legal Big Question poll found that 67% of top business lawyers are expecting double-digit growth in revenue over the next 12 months, inching up from 66% last quarter. The figure has risen steadily since April 2005 when it stood at 48%.
Thirty-eight percent of respondents are expecting a rise of 10%-15%, while a quarter (25%) foresee a rise of 15%-20% and 4% are hoping for 20%-25%. A further 24% expect a more modest increase of 5%-10% and 9% think the increase will be less than 5%.
However, overall business confidence fell slightly during the three-month period, with only 89% of lawyers now saying they expect an increase in turnover over the coming year, compared with 94% at the beginning of July.
Just 2% of respondents thought that turnover would decrease, while 9% thought that they would stay the same. The figure has fallen from 97% in January.
Slaughter and May head of M&A Stephen Cooke said: "It is only natural that there has been a small decrease in confidence from last quarter. The longer the bull market continues, the more people are likely to think it is closer to reaching an end.
"The past six months have been very busy – the busiest it has been since 2000. There is obviously some chance that we are at the peak now."
Travers Smith head of corporate Chris Hale added: "Most firms have had an exceptionally good year last year, so to top that means you either need to charge more or increase the number of lawyers.
"There are not the large numbers of lawyers in the market that you would need for everyone to see massive sustained increases.
"Equally, you can only increase fees to a certain extent. We are probably reaching a peak and that is why there are fewer people opting for the higher end of the income increases."
Two-thirds of respondents (66%) said their firms are targeting corporate finance as their principal area of investment over the coming year. Both banking and litigation received 9% each, while property received 7% of the vote. Employment, insolvency and projects/PFI each got 4% and IP/IT and tax all got 2%.
CMS Cameron McKenna insolvency partner Rita Lowe said: "The market has tended to vacillate recently, but firms tend not to rely on just one area of business, so it is fair to expect a good level of growth given the busy summer we have all had.
"Most managing partners would like to think 10%-15% growth would be about right. I expect it will vary across practice areas though."
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