The findings of the annual profitability survey, sponsored by Lloyds TSB Commercial, show that practice fee income for legal firms increased by 3.6% in 2012, as law firms continued to adapt to challenges in the legal marketplace.
In 2011 growth was more modest, with practice fee income showing a marginal increase of 1%.
The survey of LMS member firms and other firms also revealed that average net profit per equity partner increased from £112,549 to £114,853 – a rise of 2%.
Now in its 13th year, the survey is widely regarded as the annual financial health check, particularly for the smaller end of the legal profession.
Law Society president Lucy Scott-Moncrieff said: "The Law Management Section helps firms to share good practice and advice, playing a key role in helping law firms steer their way through challenging economic conditions.
"There is no one-size-fits-all approach that will help firms emerge from the recession or adapt to tough market conditions facing the sector, but for many law firms, a robust management system underpins their success. The LMS survey provides an invaluable insight into management structures."
Phil Wilson, senior manager, specialist markets for Lloyds TSB Commercial in Buckinghamshire, said: “This year’s survey results demonstrate once again the remarkable resilience of the solicitors’ profession. In difficult economic conditions. It is really impressive to see median income grow 3.6% and a similar percentage growth in median net profit per equity partner.
“Partners tend to have three roles in their business – as investors, managers and practitioners – and the challenge is to do justice to each role. This important annual survey provides detailed and valuable data to allow them to look at their firm’s financial performance objectively and make the right investment and management decisions. Without those, it really doesn’t matter how great a practitioner you are."
Other key findings from the survey were:
- The number of support staff per fee earner remained steady at 0.61;
- The 166 firms that responded to the survey recruited 824 new staff, incurring total recruitment costs of £7.65 million;
- The median spend on non-salary overheads per fee-earner was £37,992 compared with £37,831 in 2011, an increase of 0.4%.