Our unique business support for law firms and our endorsement by the Law Society mean that we act for over 100 law firms every year. As a result, we gather a huge amount of financial and operational information on those firms which we compile in our benchmarking database. Although each and every one of our law firm clients receive a personalised benchmarking report for discussion as we review their annual accounts, we have also summarised the results of all of the firms in our annual benchmarking report for 2016/17.
In general, 2016/17 shows that the return to profitability appears to be continuing. A large driver of that is the average fee income per fee earner, which has increased to £126,000 in 2016/17. As a result of this increased profitability, firms have looked to recruit, with higher numbers of staff per partner which has risen to 9.2 people in 2016/17. This recruitment though has not resulted in a significant impact on staff costs as a percentage of fees, which has risen marginally to 34.6%. Firms have also continued to use the higher profit levels to invest with increased marketing costs being evident.
Despite that, cash still appears tight as lock up has increased; investments have been made and therefore drawings have fallen behind profits. This has resulted in average partner capital accounts increasing, which may cause succession problems in the future.
If you are interested in seeing how your firm compares with the benchmarks in this report, or want to investigate variances with your own firm’s performance please contact me at craig.foxcroft@armstrongwatson.co.uk
Craig Foxcroft
Legal Sector Manager
Armstrong Watson
Craig Foxcroft is a Legal Sector Manager at Armstrong Watson, specialising exclusively in advising law firms. Craig is part of the legal sector team at Armstrong Watson, which has 16 offices and over 400 people. The legal sector team advises law firms throughout the UK on strategic, structural and other business improvement issues as well as providing efficient accounting, tax and SRA accounts rules services.
This article is a general guide to the issues that we see in practice. It is not a substitute for professional advice which takes account of your personal circumstances. No responsibility can be accepted for any loss occasioned by any person acting or refraining from action on the basis of this article.
The Law Society has exclusively endorsed Armstrong Watson for the provision of accountancy services to law firms throughout the whole of the North of England.
