Asia and litigation tipped as growth targets in Legal Week business confidence survey. Friederike Heine reports

A double-dip recession in the UK has put only a minor dent in business confidence at major law firms, with four out of five partners predicting income growth over the next 12 months.

Legal Week's latest business confidence poll shows 79% of partners expect growth in the 12 months ahead, with 44% of respondents forecasting income growth of more than 5%.

More than a third (35%) of respondents to the survey predict that revenues will rise by up to 5%, with 15% forecasting static income and 6% of respondents expecting their top line to contract. Just 7% of respondents expect double-digit growth.

While the figures confirm that confidence at major law firms has modestly dipped over the past 12 months, the results underline the relative resilience of the legal industry at a time when many economies are struggling to escape the impact of the prolonged eurozone crisis.

Despite 2012 seeing a handful of major law firms announce job cuts, there has yet to be a re-run of 2009, when a number of major law firms pushed through restructurings in the wake of the recession.

Allen & Overy managing partner Wim Dejonghe (pictured) commented: "The UK legal market has held up well against the backdrop of the eurozone crisis. M&A levels have remained low by any historical standards and there is not a lot of new money available. Most firms have completed wide-scale cost-cutting exercises in the wake of the recession, and now firms will have to begin reinvesting."

Ashurst managing partner James Collis told Legal Week: "It's a difficult market and that is not about to change – we won't be going back to the heyday of the mid-2000s in the next couple of years.

"As a result, we are unlikely to see any dramatic increases in profit figures over the next few years, except when firms have made structural changes to their business."

Unusually, partners were slightly more bullish about the legal market as a whole than their own firms, with 85% of respondents expecting growth across the UK top 50, with the remainder predicting static or falling fees.

As in previous polls, Asia is regarded as the best prospect for growth over the next 12 months, cited by 62% of partners. Other regions seen as relatively strong economic prospects were the US and the Middle East/North Africa, cited by 13% and 9% of respondents respectively.

The UK was cited by 7%, the same as Central and Eastern Europe/Russia and ahead of Western Europe, which was identified as a prime growth prospect by only 2%.

Confidence in Asia comes despite a relative lull in deal activity in the region over the past 12 months and has dipped, compared with previous polls, after reaching a high in April 2011 of 75%.

Linklaters Asia managing partner Stuart Salt said: "Business confidence in Asia has been unsettled by macroeconomic factors such as continuing eurozone turbulence and speculation about the growth outlook for China.

"We are expecting a relatively quiet summer period in terms of overall transaction volumes. But in addition to strong activity levels in our litigation and regulatory practices, we are still seeing high-quality deals succeed in the current market conditions.

"Asia deals announced in the past month or so illustrate this. In our case, we have advised during this period on a number of transactions."

Top investment priorities in terms of practice areas remain little changed since January – when the survey was last conducted – with partners highlighting litigation and corporate as the key areas to expand, cited by 48% and 36% of respondents respectively. Other investment priorities included banking (25%) and restructuring/insolvency (20%).

Partners on business confidence

79% expect growth at their own firm
48% see litigation as top investment priority
7% are expecting revenue increases of more than 10% in next 12 months
6% expect their revenues to fall in next 12 months