City partners are generally upbeat about the year ahead despite a dip in overall confidence levels as the full extent of UK Government spending cuts begins to emerge, according to Legal Week research.

Legal Week's quarterly business confidence survey, which canvasses senior lawyers on their outlook for the year ahead, found that nearly three-quarters (74%) of partners expect revenues at their own firm to grow over the next 12 months, with more than four in five (83%) expecting revenues across the top 50 as a whole to increase.

However, only 6.5% of respondents predict double-digit increases in turnover at their own firm – dipping from 16% who thought that in July this year and marginally down on the 7% expecting double-digit growth in April. The majority (39%) expect revenue increases of up to 5%, with 28% going for growth of between 5% and 10%.

More than one in five partners predicts revenues will stay static, with around 4% expecting to see a drop. Despite the dip in confidence, the figures are still a long way off the all-time low of April 2009, when only 22% of partners expected growth and 37% expected to see revenues decline.

As Legal Week went to press, Chancellor George Osborne was set, on 20 October, to unveil detailed proposals to cut back public spending as the coalition Government moves to eliminate the UK's structural deficit.

Ashurst managing partner Simon Bromwich commented: "The market is still quite uncertain as we go into the winter. Obviously in the UK we are awaiting the severe public spending cuts as well as the January VAT rise, which means that there are some pretty dark clouds hanging over us.

"Contrasting that, we have had a good first five months of the financial year and our activity levels are up compared to a year ago."

Nabarro senior partner Simon Johnston added: "We have just passed the two-year anniversary of Lehman Brothers' collapse, and it does feel as though we are emerging – slowly and with a few bumps – from the worst of the downturn.

"There is a general feeling that things are moving forward, with more talk of transactions as clients consider positioning themselves for the recovery. We will certainly be watching for the impact from the proposed public sector cuts but, in the short term, hope that there will be more opportunities coming through the private sector as the recovery consolidates."

With only 4% of respondents naming the UK as the region likely to be the best-performer over the next 12 months, compared with 9% last quarter, law firm leaders are more upbeat about their international practices. Asia has been touted as the best-performer by two-thirds of respondents (65%), while belief in the US as the strongest performer fell from 14% last quarter to only 6.5%.

Taylor Wessing managing partner Tim Eyles said: "Compared to last year we are much more confident. We are especially seeing a lot of work internationally, with the markets in China, India and the Middle East all on the up."

Corporate and litigation remain the top investment priorities for firms, with 57% of respondents saying they intend to grow in corporate, followed by 39% planning investments on the litigation side. Intellectual property and real estate are tagged as the two areas least likely to see investment.

Allen & Overy global corporate group chairman Richard Cranfield commented: "The M&A market is improving gradually since the lows of 2009. We expect it to continue to grow slowly as opposed to making a big uptick. I expect the firm's performance in the area will reflect the market; however, things can change quickly as activity levels are very sensitive to the macro-economic environment."