Quarterly pulse survey report: Q4 (October to December 2021)

It is the leading survey for medium sized and smaller firms in England & Wales, providing participants with a bespoke report showing how their firm compares to similar firms.

To compliment insights from the annual survey, we developed a quarterly pulse survey to provide a timely barometer of business conditions for small and medium sized solicitor firms.

This paper reports on firms’ experiences of quarter four (Q4, October to December 2021). 116 firms participated. 

Main points from Q4 Survey 

• General activity levels in the participant results in quarter four have remained muted compared to the first two quarters of 2021. 34% of firms reporting an increase in fees issued compared with 58% in Q2 and 52% in Q1
• As in Q3, a smaller proportion of firms reported increases in chargeable hours in Q4, compared to the first two quarters, reflecting a declining profile of productivity in firms compared with those earlier in 2021
• It was noticeable that there were significantly fewer firms reporting growth in matter starts and specifically residential conveyancing matter starts in Q3 compared to Q2 (Q4 29%, Q2 66%)
• Q4 results reflect a continued slowing in headcount growth in firms (both at a fee-earner and support staff level)
• In Q4, 27% of firms reported an improved cash position which is a less than Q3 when 40% of firms reported and improved position. This is probably linked to the lower productivity points mentioned above
• Business confidence in Q4 also appears slightly higher than in Q3, but has not returned to Q1 and Q2 levels, with 49% of firms reporting an expected increase in their fees issued (Q2 54%) and 42% (Q2 49%) of firms predicting an increase in their profitability

Income, expenditure and new work 

In total 70% of firms reported fees issued either remained consistent or were higher than the previous quarter.

Over half of firm reported the number of chargeable hours recorded had remained static. 

Over two-fifths (44%) of firms offering residential conveyancing services saw a decrease in the number of new matter starts for this area in Q4, which appears naturally linked to the end of the SDLT relief scheme. 

Staffing (working arrangements and pay) 

• Headcounts remained stable. 15% of firms reported an increase to their fee-earner headcount and the same proportion had increased their support staff head count
• A small proportion (12%) of firms expected standard inflationary pay rises to be over 5%. 42% expected a rise of less than 3% and 46% expected a rise of 46%
• Most commonly cited estimated total payroll cost increases were between 3 and 5%
• Gross salary, flexible working options, holiday entitlement and remote working opportunities were viewed (by firms) as the most important factor to new fee earners in relation to their contract and the firm
• The majority of firms had hybrid working arrangements: around one third of firms (36%) had between 80% and 100% of fee-earners in the office five days a week, around one half (47%) had 80% to 100% of their support staff in the office for the full week

Standard inflationary payrise expected in 2022

Estimated total payroll cost increases in 2022

Contract features considered important by fee-earner candidates (mean score out of 5)

Cash position

• 27% of the 113 participating firms reported a better cash position compared to Q3 but 30% reported a worse position
• 35% of responding firms anticipated a better cash position next quarter

Business confidence

Businesses were confident in their outlook for the next twelve months, with around half predicting an improvement in firm’s fees (42%) and profitablity (49%).

Participating firms in Q4

A big thank you to the 116 firms who took part in the Q4 pulse survey.

This survey provides insight into how your firm compares with other SMEs in the sector.

Paul Bennett, chair of the Law Management Section

“The Law Management Section Pulse Survey is new and intended to support the profession with some detailed data collection on current issues every quarter. We are delighted with the level of response and would encourage firms to participate next time and to help us grow the survey so they have the chance to help shape the knowledge of the current issues.”

Q3 compared to Q1 and Q2

Additional insights can be gained by looking for changes between the quarterly surveys.

Some caution needs to be applied as the number and profile of participating firms may differ between quarters.

In Q1, 70% of firms had turnover up to £2 million, in Q2, this had dropped to 45% of participating firms in Q3, before increasing to 77% in Q4. This difference may have an impact on aggregated findings.

As further data is collected, analysis will be conducted to look differences by size of firm and for any seasonal affects.

Percentage of firms reporting an increase (Q1 to Q4, 2021)

The following charts compare data from

• Q1, comparing change between January and March 2021, with the previous quarter (October to December 2020)
• Q2, comparing change between April and June 2021, with the previous quarter (January to March 2021)
• Q3, comparing change between July and September 2021, with the previous quarter (April to June 2021)
• Q4, comparing change between October and December 2021, with previous quarter (July to September)

These charts suggest:

• a smaller proportion of firms reported an increase in chargeable hours, fees billed and number of matter starts in the last two quarters compared to Q1 and Q2
• for firms providing residential conveyancing, the proportion of firms reporting an increase dropped from 66% in Q2 to 21% in Q4
• a smaller proportion of firms reported increases to their fee-earner and support staff headcount in the last half of the year compared to Q1 and Q2
• a smaller proportion reported a better cash position compared to the previous quarter both actually and had anticipated a better cash position in the next quarter, compared to quarter. The proportion of firms anticipating an improved cash position next quarter had increased slightly
• business confidence in firm’s fees and profitability over the next 12 months were slightly improved compared to previous quarters, although not to the same strength as in the previous quarter

Percentage of firms reporting an increase in fee-earner and support staff head count

Percentage of firms reporting an increase in cash position and anticipated cash position (Q1 to Q4, 2021)

Percentage of firms predicting an increase in firm’s fees and profitability (Q1 to Q4, 2021)