Strong performance from resilient law firms who face increasingly choppy waters
Resilient law firms reported a strong performance in fee-income during the financial year 2021-2022, according to the Law Society of England and Wales Leadership and Management Section Financial Benchmarking Survey.
In its 22nd year, the survey for 2023 collected financial data from 155 principally small and medium sized solicitor firms, with a combined income of more than £1.1 billion, making it one of the largest of its type in England and Wales.
Overall, 75% of participants reported year-on-year growth in fee income in 2022 with 46% seeing growth of more than 10%.
Median practice fee income increased by 9.2% whilst median fee income per equity partner increased by 5.4% from £891,693 in 2021 to £939,525 in 2022.
“It is encouraging to see law firms continuing to perform strongly, especially given the difficult economic climate we are all facing,” said Law Society president Lubna Shuja.
“As the cost-of-living crisis hits England and Wales, the legal sector will continue to be an important driver of the UK’s economy.
“It is good to see firms focusing on helping staff deal with the crisis and increasing salaries to retain and recruit staff.
“Of course, some firms struggle more than others, with lack of government investment continuing to hit legal aid firms.
“In this current crisis, lawyers are needed more than ever to help people access justice in their time of need. The government must take action to stop the shortfall in legal aid providers before it is too late.”
Total salary costs as a percentage of fee income increased by 0.4%, from 58.5% in 2021 to 58.9% in 2022.
A key challenge facing all firms is the need to attract and retain high-quality staff. Recent increases in the cost of living meant that firms have felt greater pressure to increase salaries.
Employment costs as a percentage of fee income will therefore continue to increase.
Paul Bennett, chair of the Law Society’s Leadership and Management Section, said: “In tough economic times the resilience of law firms shines through, although we need to remember these findings pre-date the cost-of-living crisis, the UK’s political contortions of 2022 in terms of multiple prime ministers and, of course, the impact of the war in Ukraine.
“The results reflect the property boom of 2021 and the challenges in the service economy during 2021/2022 financial year. Resilience is, though, a good sign knowing as we do that firms are currently steering through the on-going choppy waters.
“Firms reviewing this year’s survey might like to consider the growth in fee income, the 10-day reduction in lockup and the median equity capital trends. These three give a great insight into fee income, collection, and capital needs: all of which will be useful to help plan ahead.
“The benchmarking aspect should help those who took part to be more profitable again. For those who did not take part, looking at the trends can help with their planning and, of course, taking part next time would ease the use of the data as every firm who participates gets a personalised summary to help them with business planning using their own data.”
Becci Wicks, regional director for London at Lloyds Bank Business & Commercial Banking, said: “The Law Society’s annual benchmarking survey provides vital benchmarking data for law firms, and is an invaluable tool for law firm owners and managers to understand best practice and to make the right business decisions.
“In 2022, continuing challenges face businesses but there are more opportunities for growth than perhaps in the last two years, and we remain by the side of our business customers to support them through this year and beyond.”
Notes to editors
Firms who would like to register their interest to participate in the 2023/24 survey can contact benchmarking@hazlewoods.co.uk
The Financial Benchmarking Survey 2023 is written and produced by the legal team of Hazlewoods LLP for the Law Society Leadership and Management Section and sponsored by Lloyds Bank Commercial Banking.
The report contains financial data from the last two financial years: 2021/22 (2022) and 2020/21 (2021) April to March and provides insight into how organisations can use data to improve performance.
About the Law Society
The Law Society is the independent professional body that works globally to support and represent solicitors, promoting the highest professional standards, the public interest and the rule of law.
Press office contact: Nick Mayo | 020 8049 4100