Manchester city view
Law Firm Benchmarking: Regional view
18/10/2018
Manchester city view
It is not just City firms that have had a challenging year, as almost 30% of regional firms experienced a fall in revenue, compared to 20% in 2017. However, of the firms that did experience growth this year, a slightly higher proportion compared to the previous year, saw an increase of more than 10%.
Like their City counterparts, equity partners in regional firms fared reasonably well this year, with a average increase in PEP of 6%. The trend among regional firms has continued to reflect a challenging legal market. We note that last year was described as being somewhat sluggish compared to prior years and the proportion of firms experiencing growth of more than 10% remained more or less the same as last year. This year’s results reveal there is a struggle among firms to maintain market share with a higher proportion of firms experiencing falling revenues. Though overall, the aggregate rate of growth was better at over 6% this year compared to just over 4% last year. As with City firms, a good proportion of regional firms reported positive movements in PII costs, with 50% seeing adecrease compared to last year. Firms of all sizes need to continue to proactively assess their risk and exposure to claims to handle a potential hardening in the market over the coming year.

Equity partners benefit from a rise in PEP

This year, 64% of firms reported an increase in PEP, compared to 60% in 2017. Slightly behind the performance of City firms, the average PEP rose by 6%. This is ahead of the average regional increase of 5% seen last year. In the context of a higher proportion of firms seeing a fall in revenues, is this indicative of a trend amongst a smaller number of successful firms taking a larger proportion of the market share from their competitors?

Despite a fall in revenue, regional firms continue to invest in staff

Regional firms continue to see staff of all types as being key to success, and total headcount increased by 3.7% in the year. At the same time, partner headcount only increased by 1.4% as firms focus on getting the staff/partner leverage correct. 

 

 

 

Regional firms continue to invest in support staff, with non-fee earning staff making up 37% of the workforce. 


Although this is only a very moderate increase compared to 36% last year, we need to bear in mind that it is the regional firms that have struggled more to improve top line performance. Could this be an indication of a growing appreciation among regional firms of the value of retaining good quality staff as well as fee earners? It is perhaps too early to tell but it will be interesting to see how the emergence of AI over the coming years will shape regional firms’ strategies and whether they will opt to invest more heavily in people or explore technology as an alternative.
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Lock-up on the rise but still lower than City firms

Although regional firms have, once again, fared better than the City with lock-up, there has been an increase in average lock-up days, which now sit at 137 days compared to 134 last year. The profile also remains similar on a near 50:50 split between WIP and unpaid bills.


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Our professional practices team advises law firms of all sizes on their growth plans, always tailoring our advice to best suit their needs.
Louis Baker
Louis Baker
Partner, Head of Professional Practices
London
Steve Gale
Steve Gale
Partner, Professional Practices and Head of Audit
London
Ross Prince
Ross Prince
Partner, Audit
Midlands