Shrinking fee earner numbers and a decline in pound sterling rates has caused a year on year drop in fee income at the UK's top 10 firms for Q1 2014-15, according to Deloitte's legal sector survey.

The auditor's research shows a mixed performance across the 100 firms in the three months leading to 31 July. Average fee income among the top 10 dipped by 2.7%, contrasting with an increase of 6.2% for firms ranked 11 to 25 and growth of 5.3% for those between 26 to 50. The remaining 50 recorded an increase of 11.2%.

The auditor attributed the decrease within the largest firms to a 2.1% fall in fee earner headcount as well as the strong pound, which has in turn weakened revenue coming in from overseas offices.

On the other hand the uptick for firms in the 11-25 bracket was buoyed by increases in chargeable hours per fee earner of 3.5% on top of improvements in rates. Fee earner numbers stayed broadly static.

The auditor said average growth in fee income across the UK's 100 top firms has grown year on year by 6.1% for the last quarter, which is largely down to a spate of merger activity and lateral hires in the last 12 months. Firms ranked 26 to 50 grew headcount by 5%.

The top 10 has predicted year-on-year Q1 growth in fee income of just over 2%, while firms ranked 11-25 forecast an uptick of just over 5%. Those between 26 to 50 have estimated an increase of 7%.

"Confidence is definitely building but fairly slowly," said Deloitte professional practices partner Jeremy Black (pictured). For the top ten, I think the market is still challenging as there is still a lot of uncertainty in the global economy. Things are moving in a positive direction in key geographies but it is still hard to gain growth in the market.

"I think those in the 11 to 25 category put in a stronger performance because on average the group has more firms with a London focus. Meanwhile I expect more consolidation will occur in the lower half of the 100, particularly for those specialising in volume work, as a large number of firms are based outside London and continue to find the market very difficult."