Deloitte research shows top 100 seeing 4% fee growth in first quarter; top 10 rise 8.7%

The UK's top 100 law firms saw a modest year-on-year increase in fee income for the first quarter of 2011-12, with new research revealing an average increase of 4% on the same period last year.

Deloitte's quarterly legal sector survey for the three-month period ending 31 July highlights a notable disparity in revenue growth between the largest law firms and the UK's smaller legal practices, with the top half of the group clearly outperforming those at the bottom.

First-quarter revenues at the UK's top 10 firms increased by 8.7% on Q1 2010-11, while those in the 11-25 bracket saw revenues rise by 4.7%. Firms ranked between 26 and 50, meanwhile, saw an increase of 3.6%, with the bottom 50 seeing fee income rise by just 2%.

The findings suggest larger firms were bolstered by their international practices, as those with global operations benefited from more buoyant overseas regions such as Asia-Pacific, while those firms with purely UK operations continued to struggle in a tough 
domestic market.

International firms also benefited to a certain extent from exchange rate fluctuations, with the sterling's weakness compared to currencies like the euro resulting in overseas revenues contributing 
more in sterling terms.

Deloitte associate partner Jeremy Black (pictured) said: "The increase in fee income will be welcome but should not mask the fact that conditions generally are challenging. Litigation has performed reasonably well, but low levels of M&A activity mean that corporate revenues 
remain lacklustre."

He added: "There is a general feeling of nervousness about the prospects for the months ahead, with domestic demand expected to remain weak and continued pressure on rates."

The survey also indicates that while one sixth of firms among the top 100 enjoyed revenue growth of more than 12%, a similar proportion suffered a decline of 4% or higher. Total headcount across the group increased by 3.1% on the same period last year.