Herbert Smith and Dentons see PEP fall as top 100 income dips

The UK's top 100 law firms saw fee income drop by less than 5% in the fourth quarter of the last financial year compared with the same period in 2008, according to research from professional services leader Deloitte.

Deloitte's latest quarterly survey found that the UK's largest law firms saw revenues fall by 4.3% compared with the same quarter in 2008.

Despite the decline, the firms still managed to grow revenues across the year, with fee income rising by 1.7% over the 12-month period – buoyed by 5.8% growth in the second quarter and 6.3% in the first. Across the top 50 revenues fell by 4.6% during the fourth quarter of law firms' financial year but grew by 3.4% over the year as a whole. However, all of the figures represent a marked decline from last year when Deloitte's research found that average growth across the top 100 was 13.2%, with firms growing by 12% in Q4.

Deloitte said the small rise in fee income was partially due to numbers being artificially inflated by the euro/sterling exchange rate.

Jeremy Black, an associate partner in Deloitte's professional practices group, commented: "The exchange rate increases make it very difficult to clearly see how well firms have actually done."

The research also found that chargeable hours per fee earner dropped by 7.1% across the top 100 in Q4, with this figure falling further for the top 10, which reported a drop in chargeable hours of 11.5%.

Deloitte's research came in the same week that Herbert Smith and Denton Wilde Sapte announced their results for the 2008-09 financial year.

On Monday (8 June), Herbert Smith said its revenues grew by 5% over the year to £444m, up from £421.8m last year. Dentons, meanwhile, saw its turnover increase by 3% to £169.8m. However, both firms saw profits decline sharply. Early indications from Herbert Smith suggest profits per equity partner (PEP) have fallen by between 12% and 22%, while Dentons saw its PEP fall by 36% to £300,000 – partly as a result of £3.5m in restructuring costs.

Black said: "The results show the challenging time that law firms went through in the final quarter of last year, but going forward there is a lot more certainty in the market."