A recent survey by PwC showed that the average profit margin for law firms operating in the NW has dropped to 13% (2010: 16%), although average profit per equity partner in the North West increased to £246,000, with 60% of law firms reporting an increase in profits in 2011. Nationally most firms outside the top 10 reported a fall in profits.
The 40% of firms most likely to report falling profits have been the high street operators most likely to be impacted by the introduction of Alternative Business Structures (ABS). The working capital performance of most law firms has held up well, with practices reporting improvements both in the number of debtor days and the length of work in progress – but this is an area where many firms have performed badly in the past so it’s no surprise that financial pressures have forced firms to focus more on these areas. They are the easiest to control internally.
Worryingly, a trend revealed by the survey is that “despite market conditions, headcount has started to drift up again. Utilisation rates for professional staff have been flat or even in slight decline. Equally surprising, given the focus on support costs, has been the renewed upward trend in the numbers of back office staff for many firms.” Larger firms have started to look at more efficient ways of operating their own business, looking towards legal process outsourcing, offshoring and even “North shoring” – ie. maintaining work in the UK, but carrying more of it out in the North where office space and salaries are cheaper.
Greater Manchester Chamber of Commerce, Legal Sector can help law firm members in Greater Manchester (all sizes and sectors) to improve and develop their business – to reduce operating costs, increase profits and launch effective new business development initatives. These are areas where we can deliver radical reductions in operating costs and improvements in service to clients. All part of the rationale for the work by the Greater Manchester Chamber of Commerce in supporting the Legal Sector.
To get involved, any employees of legal practices that are members of the Chamber can join their LinkedIn Legal Sector Group here, participate in LinkedIn local “Special Interest Sub-Groups” each relating to Legal Technology, Financial management, HR & People development and Facilities management. We are also organising local forums for members of each SIG like this one for people involved in Legal Technology scheduled for 11th January 2012. To check if your practice is already a member of the Chamber, all you need to do is apply for membership of the LinkedIn Legal Sector Group here and we will take if from there.
Your practice could become members if any of your offices are located in the Greater Manchester area.