Half a step forward - law firm growth picks up pace at halfway mark
It's a depressing week for doom-mongers because the first indications on the half-year results for 2010-11 are pretty clear: business is picking up pace for commercial law firms. Earlier research from Deloitte had already shown that fee income was up 5% annually in the first quarter of the current financial year, though that came against a weak previous quarter. In contrast, the full half-year included the second quarter of 2009-10 as a comparison point, which was the first period in which many firms began to see signs of modest recovery after a prolonged battering in the wake of the banking crisis that gripped the markets in late 2008.
November 09, 2010 at 02:40 AM
3 minute read
It's a depressing week for doom-mongers because the first indications on the half-year results for 2010-11 are pretty clear: business is picking up pace for commercial law firms.
Earlier research from Deloitte had already shown that fee income was up 5% annually in the first quarter of the current financial year, though that came against a weak previous quarter. In contrast, the full half-year included the second quarter of 2009-10 as a comparison point, which was the first period in which many firms began to see signs of modest recovery after a prolonged battering in the wake of the banking crisis that gripped the markets in late 2008.
This means that the majority of firms are now generating growth against a more solid comparison. At this point last year, the majority of large law firms were seeing a fall of at least 5%, while some, like CMS Cameron McKenna and Taylor Wessing, were down against H1 the previous year by more than 10%.
The current recovery is, so far, widely spread, with Allen & Overy putting in a solid 3% rise and Clifford Chance partners hoping to build on the firm's recent bounce-back. Firms that appear to have achieved a particularly sharp revival include Norton Rose, Nabarro and Wragge & Co, which are all firmly back in growth mode after seeing notable falls in revenue last year. On these trends – and half-year numbers are surprisingly accurate predictors for the full year – it would be surprising if the UK top 50 wasn't moving back into modest growth next year after contracting slightly in 2009-10.
Obviously, it would be a stretch to call this a robust recovery. There are still a fair number of firms posting modest falls in revenue, though there is little pattern in terms of market position or practice mix.
This strongly suggests that the months ahead will remain very unkind to firms that have failed to get their act together during the downturn. But if some firms seem to be struggling to move back into growth mode, in some cases it appears to be because firms are now so obsessively focused on protecting the bottom line at the expense of revenue.
And it remains a fact that UK law firms have managed to get into recovery mode despite a market that is, by any historical yardstick, patchy or, in the case of the transactional market, barely off the operating table. This has to be taken as an endorsement of most firms' decisions to go through short, sharp restructurings last year.
The clouds on the horizon – eurozone debt, Austerity Britain – scarcely need recounting, but so far the UK's leading law firms have done what they can to keep moving in the right direction.
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