2016 was a year of strong growth for firms polled in the Law Society Law Management Section (LMS) Financial Benchmarking Survey 2017, which showed a median rise in income of 5.8 per cent for the mid-sized firms that participated.
The president of the Law Society of England and Wales, Robert Bourns, commented:
’This survey is a great annual health check for mid-sized practices. The report indicates that, overall, participating firms are achieving a 10 per cent net profit margin.
’The legal sector is an active and vibrant contributor to the UK economy. In 2015 it contributed £25.7bn to the UK economy, £3.6bn in net exports, with overall growth of eight per cent.
’Our Future of Legal Services report identifies the key drivers for change in the sector, together with the opportunities and potential challenges. Having good management helps firms financially, which will be important for them to remain sustainable in the face of increased competition.’
According to the LMS Financial Benchmarking Survey 2017, most work types have seen increases in fee income, although criminal law teams in particular have seen a reduction, for the fourth year in succession.
Paul McCluskey, UK head of professional practices, Lloyds Banking Group commented: ’Sound financial management must be the beating heart of any legal practice.
’The LMS Financial Benchmarking Survey 2017 is an invaluable tool for law firm owners and managers to understand best practice and make the right business decisions. I am certain firms that seek out and use external comparators will continue to be successful, irrespective of new market entrants.’
Looking ahead to 2017/18, the survey notes that practices with an annual salary bill of over £3m will be required to pay the government’s new apprenticeship levy from April 2017 at a rate of 0.5 per cent of an employer’s pay bill, minus an annual allowance of £15,000.
The survey also indicates:
The LMS Financial Benchmarking Survey 2017 is written and produced by the legal team of Hazlewoods LLP for the Law Society Law Management Section and sponsored by Lloyds Bank Commercial Banking.
The 2017 Law Society LMS Financial Benchmarking Survey 2017 was based on questionnaires completed by 152 firms from across England and Wales with a combined income of £665mn.
This is the 17th year of the survey. Participants provided two years’ data.