Top-flight law firm finances bounce back from pandemic
Almost all of the UK’s top law firms are seeing their fees and profits top expectations this year as they successfully navigate the impact of the pandemic, a report has found.
The analysis by PwC also found that almost half of the top 100 firms expect to reduce their office footprint in response to new working patterns.
PwC’s 30th Law Firms’ Survey revealed that the pessimism across the legal sector reported in 2020 has shifted to optimism with 97 per cent of top firms outperforming financial forecasts.
Just under three-quarters of firms reported an increase in fee income with 76 per cent posting profit increases. The findings confirm the strong trading environment highlighted by latest figures from Scottish legal heavyweights including Brodies and Shepherd and Wedderburn recently.
However, the PwC report also highlighted challenges facing the sector including a shortage of talent, which is the second highest rated issue behind cyber risk for the top 100 firms, and adapting to new working patterns.
According to the analysis, 48 per cent of firms expect to reduce their office footprint in the short to medium term. Three in four are expecting to reconfigure remaining spaces as priorities change towards collaborative, team friendly spaces.
PwC said the shift towards a hybrid working model also highlights the vital role IT plays and the need for continual re-investment not only to keep the wheels turning but to remain competitive and benefit from more advanced technology in the market.
Kate Wolstenholme, PwC’s law firms’ advisory leader, said: “These are fast moving and exciting times for UK law firms as they continue to adapt to operating flexibly in a post-pandemic climate. Law firms have experienced significant disruption over the last 18 months and most firms have been agile in fast-tracking changes in their working culture.
“As we move forward, we will see how law firms best respond to challenges, both old and new, such as adopting hybrid working in a way that retains talent, capitalising on investment in technology, and delivering on ESG promises including diversity and inclusion targets, climate related goals, and social responsibility."
The survey also looked at the issue of cyber-security for firms in an increasingly IT-driven sector.
While only a few firms have suffered a ransomware attack over the last 12 months - just 4 per cent across the Top 100 - awareness of the increasingly sophisticated nature of these attacks has steadily risen.
PwC said that given the growing capabilities and organisation of these attackers, it’s vital that firms take steps now to understand and reduce their vulnerabilities, from documenting response plans to regularly running attack exercises for leadership and wider teams.
In August Shepherd and Wedderburn revealed that staff members had each been given a 5 per cent bonus after the practice returned to profit growth despite the pandemic.
The payout came on top of the firm's performance-related bonus scheme after profits before partner distributions rise 13 per cent to £25.3 million in the year to April 30. The previous year had seen profits dip by 1.7 per cent.
Staff at Brodies, the largest law firm headquartered in Scotland, also shared a bonus pot of more £1m after it saw revenue and profits edge up as clients sought help during the pandemic.