Partners at the UK's leading firms are expecting the Legal Week top 50 to continue on its steady growth path, with nearly half (48%) predicting revenue to grow by more than 5% this year, according to Legal Week's latest Big Question survey.

With 33% of the respondents to the business confidence survey predicting fee income to increase by 5%-10% over the next 12 months and a further 15% expecting double-digit growth, the poll suggests most UK partners remain cautiously optimistic about their prospects despite continuing global economic instability. Conversely one in six (16.5%) respondents expect top 50 revenues to stay static with 7.5% predicting a decline in growth.

"Huge geopolitical issues in Russia, the eurozone and the Middle East, together with the likely dampening effect of the May general election in the UK, give us real cause to question whether these levels of activity are likely to be sustained through 2015," says Macfarlanes' senior partner, Charles Martin (pictured, below).

"If [the election] does have an effect it's quite difficult to counter," agrees Travers Smith managing partner Andrew Lilley. "But if you look at our order books now they're in good shape. We have not detected a slowdown yet."

The survey suggests many partners believe the UK top 50 will record a similar performance in 2015 to last year when combined turnover grew by 6.2%. The average revenue increase across the top 50 was 7.1%.

"I think there is reasonable confidence going into this year, but there are threats and pressures and not all law firms can take advantage of the conditions," says Herbert Smith Freehills' joint chief executive, Mark Rigotti. "For smaller firms with limited geographic footprints and products it may be difficult as you have to work out what you focus on."

Dentons UKMEA senior partner Martin Kitchen adds: "My sense is that there has been a reasonable degree of growth in the last calendar year but nothing spectacular, and I expect that to continue. I don't think we will see any runaway growth."

Regional prospects
Thirty-six percent of respondents expect the UK to be the best-performing region over the next 12 months, with a slightly smaller percentage (30%) predicting that North America will take the top slot. "We are confident that there will be US funds looking to make strategic investments in other areas of the world where the economies are struggling somewhat," explains White & Case London executive partner Oliver Brettle (pictured, below).

Africa, often mentioned by partners as the region to watch as an increasing number of firms make forays into the continent, receives 4% of the respondents' votes to be the best-performing region of 2015. "There's a lot going on in the subcontinent of India and the continent of Africa, where we are doing a lot of work for clients," says Rigotti. 

Partners point to the current political and economic discord across Western Europe and Central and Eastern Europe/Russia as an ongoing source of uncertainty.

Hitherto fast-growing areas Asia and South America receive less support than in the past, with 13% and 9% respectively expecting the best performance to be in either of those regions. "There is going to be a lot more American money coming in to the [Asian] market in 2015. I think Asia is going to continue to see good growth," predicts the head of Wragge Lawrence Graham & Co's US desk, Richard Goold.

Dentons' Kitchen is more upbeat about the still-volatile Middle East than most: "We saw the Middle East growing in the last year and we have seen activity levels increasing reasonably significantly."

Firm optimism
Partners are more optimistic about the outlook for their own firms in 2015 compared to the market as a whole, with 41.5% of respondents expecting their firm to grow revenue by 5%-10% over the period, and around a quarter anticipating that their firm will boost revenue by 10%-15%.

"We'll be very disappointed if we don't achieve a decent increase," says Sharon White, chief executive at Stephenson Harwood. "But having said that, we are conscious of the looming election, which is likely to have some impact on businesses in the UK."

Rigotti adds: "It is really hard to predict financial outcomes for 2015 with the general election in the first part of the year. But I think it will be OK. We believe that even with flat revenue we would increase profit."

Norton Rose Fulbright EMEA managing partner Martin Scott says: "The increase in market activity and resulting growth in corporate confidence, along with the continued rise in regulation and investigations, resulted in a strong finish to 2014 and we expect this activity to continue in the first half of 2015."

The top strategic priority for firms over the next 12 months is to improve profitability, with almost two-thirds (64%) of respondents identifying it as their main concern. Only 17% say growing lawyer numbers will be the focus for the year, while just 3% have cutting costs at the top of their list.

"For Taylor Wessing, I'd like to see the benefits of international integration continue to emerge; to see an even stronger sector profile; to bring more internal talent through to partnership," comments managing partner Tim Eyles (pictured, below).

Urge to merge?
The last few years have seen high-profile mergers across several jurisdictions, and partners say they would be surprised if there was not another headline tie-up in 2015. However, only 11% of respondents named mergers and consolidation as their own firm's top strategic priority. "Mergers and consolidation will continue at lower levels, forming new top 50/top 100 firms," says one partner. "The old guard will continue to be challenged."

Eyles adds: "My predictions for 2015 are that we'll see at least one major UK-US merger, one top 100 law firm in financial difficulties and a high level of lateral activity."

Broken down by practice area, two-thirds (66%) of respondents say corporate will be their firm's top investment priority in the coming 12 months, with litigation and real estate the next most popular choices (27% each).

"Our pipeline for January is looking fairly robust, with a lot of US inward investment," explains Jones Day's London managing partner, John Phillips. "Public takeovers is another area that seems to be growing. Five or six months ago it was pretty dead – it was one of the quietest periods our takeover panel had had for many years. That's changed significantly over the past few months."

Pressures on costs and the demands on lawyers to diversify their offering to clients look set to be continuing themes in 2015. Several partners believe that, to succeed in the current conditions, firms must be more flexible and creative.

"The next year – and in fact the next five years – will be more challenging than the last. That really excites me," says Pinsent Masons' senior partner, Richard Foley (pictured, top). "It means firms that are focused and have the knack of innovating and thinking differently about the delivery of legal services have an opportunity to upset the established order like never before."

One survey respondent says: "Prudently managing costs, nurturing areas of growth and (for those outside the magic circle) 'tarting oneself up' for merger will be themes that management teams will continue to foster. Managing over-inflated remuneration expectations will also be key."

"The underlying structure of the market continues to change very rapidly," concludes Macfarlanes' Martin. "We are seeing increasing willingness on the part of clients to disaggregate and work with multiple providers both domestically and internationally. For us that creates some threats along with many exciting opportunities."

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