The predictable recovery grinds into gear

I'm not planning on writing much about results this year because there isn't much to say that wasn't obvious a long time ago. In the wake of the banking crisis, the 2008-09 year delivered a jolt to law firm finances and led to a string of dramatic restructurings. But it has been apparent for at least six months that major law firms have been hauling themselves into recovery mode, in relative terms at least.

The first indications for 2009-10 do nothing to change the sense that law firms have passed the worst, having now stripped down their cost bases for less bountiful years ahead. In essence, the UK's top 25 firms are generally falling into two not-dissimilar camps. On one hand you have practices expected to hold steady or marginally increase their turnover. Probably the larger group, certainly the one that includes more of the largest City and national law firms, is set for marginal falls in revenue against 2008-09.

Profits are harder to gauge at this point, but the consensus is that, for leaner and meaner inhabitants of the legal jungle, profits per equity partner (PEP) are set to start rising again at a fair number of practices. Certainly, it would be surprising if the top 50 saw a repeat of last year, when PEP collectively fell by 17.3%. There is another reason to believe the results will look comparatively better than last year: the relative ease it has taken to get a steer from leading firms – a stark contrast to 2009, when many tried to delay announcing numbers until the last possible moment.

If there is something predictable about the way the 2009-10 year is shaping up, another theme has become equally familiar. That is the extent to which the commercial legal profession has continually and materially exceeded the gloomy predictions made about its financial prospects, both from inside and outside the profession. At this stage last May, an experienced consultant emailed me to argue that Legal Week was being too optimistic in its predictions based on the feedback he was getting in the market. As it turned out, we did initially err slightly, but we were actually a tad too bearish on the performance that was confirmed during the late summer. If observers have generally been too apocalyptic, so have many partners. Our quarterly business confidence poll has found partners to have been consistently more downbeat with their market forecasts than the performance that has ultimately been delivered.

Of course, the UK and global economy remains very vulnerable to further shocks and faltering confidence – as political events at home and in Europe over the last week have reminded us. But providing another market meltdown is avoided, law firms are well on course for recovery. Let's just hope the country can manage the same trick.

Click here to follow Legal Week on Twitter