More mid-tier mergers predicted as top 100 growth stays low

Firms scale back hopes for growth as top 100 Q3 results disappoint

The UK’s largest 100 law firms have seen average year-on-year fee income growth of 3.5% during the third quarter of 2012-13, with mid-tier firms in particular continuing to struggle to grow revenues.

Figures from Deloitte’s quarterly law firm survey show that revenue across the top 100 rose year on year by 3.5% in the three months to 31 January. This comes after the equivalent Q2 figure of 3.4% marked the slowest rate of growth for seven quarters. Drivers for the modest upturn included a 1.8% rise in fee earner headcount and a 1.9% increase in average fees per fee earner.

The weakest Q3 performers were mid-tier firms in the 26-50 bracket, which saw average growth of just 0.2%, while firms in the UK top 10 enjoyed the best performance, reporting average turnover growth of 7.4%. Those in the top 11-25 followed with 3.7% average growth, while firms ranked 51-100 saw an average revenue increase of 3.1%.

Deloitte professional practices partner Jeremy Black said: “Firms rely on growth, but growth just isn’t picking up enough – they now face the challenge of fundamentally assessing whether their existing business models are appropriate in this tough climate. I think we will see more consolidation between firms, particularly in the mid tier.”

The sluggish growth has led firms to lower their forecasts for the year, with the group now predicting an average full year revenue rise of 3.3% compared with the 5.7% growth predicted at the start of the financial year.

CMS Cameron McKenna senior partner Dick Tyler (pictured) said: “I’m not surprised firms are cautious in their forecasts. The most important three months of the financial year are left to go and no doubt most will be expecting to bill more than a quarter of their annual revenues in the last three months. 

“I wouldn’t expect firms to be gung-ho in a market where you don’t know what’s around the corner.”