The Financial Benchmarking Survey 2021 presents financial performance data on the financial year from 31 March 2019 to 30 April 2020, the year before the coronavirus (COVID-19) crisis began to affect the UK.

The survey is written and produced by the legal team at Hazlewoods LLP and sponsored by Lloyds Bank.

The survey shows that:

  • in early 2020, many firms were performing well, with 60% of participants recording year-on-year growth and one-quarter seeing growth of more than 10%
  • median practice fee income increased by 1.6% (the smallest increase for nine years) and income per equity partner increased by 3.7% from £775,515 in 2019 to £804,437 in 2020
  • firms reported a drop in profits per equity partner for the second year running – with a median drop of 6.9% for participating firms. Despite increased fee income, overheads grew more quickly than fees, leading to this fall in profits
  • median spend on non-salary overheads per fee earner (everything except salary costs) was up 4.5%. Much of this was driven by rises in the cost of professional indemnity insurance cover and additional spend on IT

Change in fee income compared to the previous year’s fee income

Overheads and profitability as a proportion of fee income

This chart shows median results only.

Firms were also asked about the impact of COVID-19, and which support measures they had made use of:

  • 83% of participants reported that they had taken advantage of assistance provided by the government and HM Revenue and Customs (HMRC) to manage through the pandemic. This included deferring VAT liability from March to June 2020, in line with expectations, given that the deferral was automatic
  • 15% of firms agreed a time-to-pay arrangement with HMRC on PAYE/National Insurance contributions due on monthly salaries, and a small number of limited company firms were able to negotiate time to pay on their corporation tax bills
  • partners in half of the partnership/LLP participant firms deferred their July 2020 tax payments until January 2021
  • support staff were more likely to have been furloughed than fee-earning staff
  • participants were asked for details of the impact of COVID-19 on their financial projections for 2020/21. The median drop in forecast income was 15%, resulting in a median reduction in forecast profits of 24%

Read the full report to find out how to use data to improve your firm’s performance and for insights on how to move on from COVID-19.

Look out for the fieldwork for the 2022 report in June and our new quarterly pulse survey.

The first quarter findings will be released in the first week of May, reporting on changes in key firm metrics from the previous quarter and business confidence for the coming year.