Confidence rises sharply over last three months after plunging in first half of 2009, with four out of five partners now expecting growth at their firm in 2010. Emma Sadowski reports

Senior City lawyers are facing 2010 in a considerably more optimistic mood according to new research, which shows business confidence rising sharply over the last three months.

Legal Week's quarterly business confidence survey found that 83% of responding partners expect revenue growth at their own firm over the next 12 months, a result that is up sharply on the last poll in October, when just 58% were expecting growth.

Nearly half of respondents (48%) are expecting growth of at least 5% this year, including 15% predicting that fee income will be up by double digits in percentage terms. Only 6% are expecting income to contract, while 11% forecast 'static' results.

The figures are a substantial improvement on the last Big Question poll in October and dramatically brighter than in April 2009, when only 22% of partners expected growth and 37% expected revenues to fall.

However, partners remain less upbeat about the commercial legal sector as a whole. Asked to judge the UK top 50 rather than their own practice, 66% of respondents forecasted growth, while 30% expected static or falling revenues.

Ashurst finance partner Mark Vickers commented: "There is a pervasive sense that the worst is behind us, but the permafrost of very restrained bank lending is thawing only slowly. While general market conditions are showing some improvement, there is still considerable weakness in the recovery."

Sean Connolly, Mayer Brown London senior partner, said: "Industry-wide, growth is going to be at a premium. The first six months are going to be challenging for firms to grow revenue and the industry will do well to increase by 5% as a whole."

Litigation and restructuring will be the top investment priorities for law firms this year. The practices were cited by 54% and 39% of respondents respectively.

Clifford Chance senior partner Stuart Popham said: "Regulation will be an important area without a doubt. [The recession] has not yet led to the rash of litigation that people expected as historically, downturns have led to disputes."

A further 36% say that corporate will remain an important area for law firms, while 21% said investing in banking was also their top priority. Other practice areas cited were employment (18%), real estate (12%), intellectual property (6%) and capital markets (5%).

The majority of respondents are predicting that the best performing regions will be outside the UK, with more than half of respondents saying they are expecting Asia (52%) to be the best performing region over the next 12 months.

Such predictions underpin expectations that international firms will sustain their current round of investment in Asia with Latham & Watkins, CMS Cameron McKenna and Shearman & Sterling already launching new teams in the region this year.

Stephenson Harwood chief executive Sharon White said: "There are signs that Hong Kong activity is picking up and Singapore is busy. Asia seems to be coming out [of the recession] faster. Generally, there are encouraging signs of activity and, although 2010 will be another tough year, it is likely to be an easier year than 2009."

Seventeen percent of UK-based partners said the US was likely to be the strongest region, while 14% highlighted Western Europe. The other cited regions were the UK (6%), Central and Eastern Europe, CIS and Russia (8%), and Middle East/North Africa (3%).