The UK may be regarded as a global leader for commercial legal services but, according to clients, a long-hours culture has also made it a natural home to the routine 'padding' of legal bills.

The key finding to emerge from Legal Week's The Verdict survey of corporate counsel, carried out in association with Davies Arnold Cooper, is that the vast majority of corporate counsel believe they have experienced 'padding' of their bills, with nearly one in three clients arguing such creative billing is a regular occurrence.

The survey found 96% of corporate counsel had experienced padding. Of these, 8% claimed that their legal fees were exaggerated 'all the time', while 23% said such billing happened 'often'.

"Law firms should concentrate on delivering excellent client service in an efficient manner rather than rewarding long hours," said Suzanne Smith, general counsel of Phoqus Group.

Chris Arnull, associate general counsel at KPMG, argued that aggressive targets and hours-linked bonus schemes do not take into account the fact that newly-qualified solicitors often lack the practical experience to work efficiently.

He said: "Law firms have to pay the salaries and bonuses that the market demands, but not all assistants seem to be worth what they get. There is clearly a learning process for assistants to go through as they progress, and whether or a not a client wishes to pay for that will vary."

The survey also finds widespread concern that aggressive billing targets and a pronounced long-hours culture at law firms creates strong incentives to 'pad' bills. Nearly two-thirds of clients (62%) felt it was inappropriate for advisers to reward their assistants on the basis of hourly billing at all. Even among clients who believed targets were reasonable, a clear majority of corporate counsel said annual billing targets should be below 2,000 hours. Forty-four percent said that the limit should be below 1,900 hours a year, while 9% said that the bar should be set at 1,900 hours and 17% said the limit should be 2,000 hours.

Aside from concerns over incentives to inflate bills, the research found concerns that quality of service is inevitably affected by long-hours targets.

More than two thirds of respondents (72%), argued that assistants cannot be reasonably expected to bill more than 1,800 hours a year, including 48% who believed that such targets should be set at 1,600 or below.

Adrian Thurston, head of legal at MFI, warned that tying bonuses to billable hours not only risked creating incentives to inflate bills, but may also be a health hazard for over-worked assistants.

He said: "As firms seem to be increasingly alive to corporate social responsibility in the wider context of society, some are neglectful of the welfare of their own employees."

Geoff Atkinson, general counsel at Monarch Airways, also argued that such aggressive hourly targets were ethically questionable.

He said: "Fatigue insidiously destroys concentration. Safety-critical jobs are very properly subject to working time limitations. A lawyer's billing rate should reduce after eight hours continuous work because accuracy and output will be compromised. Why should the client be expected to pay the same for a progressively inferior service?"

However, some corporate counsel conceded that the demands of clients have put increasing pressure on firms and associates to produce work at short notice. A third of respondents also believed that there should be no upper limit on billable hours and 38% felt that it was appropriate for assistants at firms to be awarded their bonuses on the basis of hours billed.

Nevertheless, the overall tone of the response strongly suggests that clients are on a collision course with their advisers as City firms struggling to resource their workload create more aggressive bonus schemes.

One corporate counsel even argued that there is a need for greater regulation on this matter: "There ought to be stricter rules on padding – particularly within firms but also externally, if possible, since it is tantamount to fraud if it does occur."

Wherever the responsibility for padding lies, it appears that corporate counsel are losing patience with firms that persistently overcharge.

Fifteen members of the representative body for in-house lawyers, the Commerce and Industry Group have reacted to the situation by forming a focus group to tackle fees-related issues.

The body, which is currently being set up, is being put together in reaction to mounting in-house concerns with the transparency of legal billing.

Nils Breidenstein, general counsel at software company BEA Systems and a member of the new group, said: "No-one has been brave enough to face this issue yet. It is about time someone did something about it."