Smaller law firms have halted the decline in fee income, while partner profits rose significantly last year, Law Society research has found.
They saw an average increase of 0.2% in practice fee income in 2010, following a reduction of 6.5% the previous year, according to the law management section’s annual profitability survey of smaller practices.
Median net profit per partner at the 200 participating firms rose 19% from £89,621 to £106,297, while the measure of profit after deducting a realistic notional partner salary came in at 7.3% of fee income, against 2.3% in 2009.
Chris Marston, head of professional practices at Legal Futures Associate Lloyds TSB Commercial  – which sponsored the publication – said that though “in many ways this year’s survey shows a steady, consolidating scenario”, the increase in the measure of profit was “a terrific improvement” to report.
The benchmarking survey also showed median fee income per equity partner of £455,650 (2009: £469,666), while median equity partner capital increased by 7% to £135,191. The median cost of a fee-earner fell 8% to £40,240 (2009: £43,938), while the ratio of partners to fee-earners remains static – a median of 1:4.
Firms are also beginning to recruit again. The practices polled reported total recruitment costs of £2.1m to recruit 1,022 people, while the average spend on non-salary overheads per fee-earner dropped to £35,551, down from £41,959 in 2009.
Law Society president Linda Lee said: “Although their are signs of recovery, that process is slow and firms will be looking at how they can continue to grow as we emerge from the recession.”
The survey is produced in association with accountants Hazlewoods. Partner Jon Cartwright said: “It was very pleasing to see practices’ financial performance begin to correct itself following an extremely challenging couple of years.”
The report will be sold at £75 to members of the section and £150 to non-members.