Partners optimistic as 94% predict revenue growth at their firm over the year ahead. Alex Newman reports

Buoyed by a surge in transactional activity and a stronger economic outlook, business confidence among partners at the top law firms is at its highest point for several years.

Results of Legal Week's latest Big Question survey show 94% of partners expect to see revenues climb at their own firm over the next 12 months, while just 4% anticipate a drop in turnover and 2% think it will remain static.

Partners also expect revenue across the UK top 50 as a whole to grow in the coming year, with 50% predicting combined revenues will increase by up to 5%. Just 6% of respondents are anticipating a fall in revenue across the group, while 14% believe average turnover will be static. Almost three out of ten are even more optimistic and expect revenues across the group to grow by between 5% and 10%. 

The survey results are in sharp contrast to this time last year, when one third of partners predicted static or falling revenues for the year ahead, pointing to the prolonged eurozone downturn and economic stagnation in the UK.

In fact, despite this bleak outlook, revenue across the top 50 increased on average by 6.9% in the 2012-13 financial year, with law firm consolidation and mergers playing a large role in the growth.

"Everyone is saying the market has picked up in the last six months," says Slaughter and May corporate head Frances Murphy (pictured, above). "There have been a few false dawns in recent years, but confidence levels are now improving. I think there are reasons for confidence, including a stronger economy and increased capital markets activity in the last 12 months."

One respondent suggested the general rise in confidence and transactional activity are "directly linked to banks removing the shackles on lending and the emergence of alternative funding sources".

However, confidence in the UK specifically is not as strong. Almost half of respondents think Asia will outstrip the rest of the world when asked to identify the jurisdictions that will perform the strongest over the next 12 months, with around 30% expecting the US to beat the competition. Just 13% of respondents believe the UK will be the highest performing region in the coming year.

Several partners still harbour scepticism when it comes to the eurozone, with "sluggish" and "stagnant" among the comments about the European economy. 

Asked to identify top investment priorities over the next 12 months, 59% of partners counted litigation as the most important area for growth, while four in 10 respondents singled out corporate as requiring more financial support. Banking and restructuring were also acknowledged as major investment priorities by 22% and 24% of partners respectively, followed by real estate, employment, capital markets and intellectual property.

"There has been a resurge of confidence in the markets," comments Clifford Chance commercial litigation partner Simon Davis (pictured, right). "People are wanting to invest and take reasonable risks, and are borrowing more. We are seeing positive signs of recovery. I think 2014 will be a good year on the corporate and financial front, and I think litigation will be very positive."

Burges Salmon managing partner Peter Morris (pictured, below), whose firm has seen a year-on-year increase in revenues in the first six months of the financial year, feels there has been "a slight lean towards transactional activity", adding that it remains "a tough market".

He continues: "We're not picking up any particular sector themes in terms of transactional activity, which is following on from the position last year, where we experienced a significant uptick. Litigation is slightly softening, but we would expect that as well."

The survey comes as several law firms – including Linklaters, Freshfields Bruckhaus Deringer, Clifford Chance and Ashurst – have predicted a rise in revenues at the half-year mark.

Trowers & Hamlins senior partner Jennie Gubbins is also optimistic about the coming months, after her firm had grown revenues year-on-year by 4%. She singles out the firm's real estate and private wealth practices as particularly productive areas in recent months.

"One area that's really picking up is private wealth, and a lot of the private wealth investors like to invest in property, so it has proved a bit of a virtuous cycle."

Elsewhere, several partners hail a surge in private equity work as a key contributor to the bottom line of corporate teams' balance sheets, with one Freshfields partner saying it is "back with a bang".