The upper echelons of the UK legal sector are splitting into two groups by earnings with the top 10 law firms paying partners an average of a million pounds each while the smaller firms come in about half that in terms of profits per partner.
According to City A.M. the average profit per partner (PEP) across the UK’s 10 largest law firms hit £1m this year, up 6.1 per cent on 2012 as the top tier of legal firms continue to outperform the sector.
Despite average UK fee income rising by just 0.8 per cent for the top 10 firms, cost cuts and reductions in headcount helped boost PEP to £1.064m, according to PwC’s 2013 law firms’ survey.
However, the next group down – those ranking between 11th and 25th – saw average profits per equity partner reach under half the amount of larger firms, at £448,000. This was despite the fact that their turnovers increased by 10 per cent.
According to CityAM, PwC partner David Snell said: “Against a challenging backdrop, 2013 could be seen as a turning point for the legal sector with the gap between best and worst performing firms widening further – and clear blue water between the top 10 firms and the rest of the sector.
“Worryingly, with almost a third of law firms outside the Top 10 recording disappointing net profit margins, our view is that unless these firms can radically restructure their business, their short to medium term survival must be in doubt.”
