Hopes for increased business volumes and profitability at law firms have reached their highest peak since 2007, according to a survey of senior industry professionals.

The report, produced by the Confederation of British Industry (CBI), found that although respondents from management, legal and other professional services reported that business volumes were flat over the last quarter, firms were confident that business volumes would pick up over the coming three months.

The quarterly Service Sector Survey also suggests there was an uptick in performance in the three months to August, with profitability rising for the first time since February 2012, and business optimism increasing steadily to the second highest point since February 2010.

As a result, following a period of retrenchment, law firms are now planning investment over the coming year with spend earmarked for IT seeing its strongest rise in two years.

The survey also found a greater proportion of respondents from management, legal and other professional services expect employee numbers in the next quarter to grow at a higher rate than at any point since the start of the financial crisis.

"There are certainly aspects of the UK economic landscape that provide a foundation for a more optimistic outlook," said Ronan O'Sullivan, London managing partner of Paul Hastings.

"For law firms that provide high-value legal services to sophisticated clients, the market remains acutely competitive."

Norton Rose Fulbright chairman Stephen Parish (pictured) highlighted the difficulties facing a number of groups in the legal services sector, despite some encouraging signs for larger commercial firms.

"Many law firms in the country are really suffering with depressed property markets in many regions and the major cuts to legal aid," he said.

"As far as the City is concerned, many of the larger firms rode out the recession reasonably well because of their international connections, and activity levels are continuing to pick up."

CBI REPORT – KEY FINDINGS

• Optimism about business conditions in the professional services sector rose significantly, at its fastest rate since February 2010

• Business volumes were flat last quarter, but firms are confident that business will pick up solidly in the next quarter

• Profitability fell faster than expected but is predicted to rise in the next three months