Smaller law firms have bucked the downward trend in fees income recorded by the biggest practices in the last couple of years, taking gross fees to a new record level, research released today has suggested.
The report by TheCityUK, which promotes the UK financial services industry, found that the contribution of the legal services sector to the UK’s GDP has doubled in a decade to 1.8%.
Gross fees in 2009/10 were £23.1bn. Nearly £14bn of fees last year came from the top 100 law firms. However, while the £23.1bn figure was up slightly on the year before, the top 100’s income fell by 4% – the first drop in over a decade.
This indicates that smaller firms have buttressed this fall to keep increasing the value of the legal services market.
The last time TheCityUK carried out a similar study, it valued the legal services market at £16.6bn/1.4% of GDP in 2006.
Partners who have stayed in post at the top 100 have not suffered financially despite the drop in income, the 2009/10 report indicates. It said that profits at those firms rose by 1% to £4.1bn by making £500m of costs savings. Profits for the first half of the 2010/11 financial year were up 6%.
Invisible exports by law firms have tripled in the decade to £2.9bn, although the figure was down 14% on the previous year.
This was supplemented by £152m in exports by barristers (up from 131m) and £250m from other legal organisations, mainly patent attorneys and internal billings related to legal services provided by companies to their overseas subsidiaries.
Taking into account imports of £714m (mainly related to billings of UK businesses from law firms based overseas), net exports of UK legal services stood at £2.5bn in 2009/10.
The legal services industry employed nearly 350,000 people in 2009, the research showed, up from 320,000 in 2007.
Khawar Qureshi QC, chairman of TheCityUK’s Legal Services and Dispute Resolution Group said: “London’s prominence in the international legal services market looks set to continue, given the underlying strength in expertise and reputation. Challenges which lie ahead include meeting the needs of increasingly sophisticated clients who demand more time/cost effective services, as well as embracing the emergence of regional hubs for legal services, such as Singapore, Dubai and Hong Kong.”