The UK’s top 100 law firms have achieved moderate growth in the final quarter of their 2011 financial year. A 6.3% increase in fee income was generated in Q4 (quarter ended 30 April 2012) compared with the same period last year, according to Deloitte, the business advisory firm.

The rise has been achieved predominantly through an increase in fee earner headcount of 5.6%, with an increase in fees per fee earner of 1.1%, also contributing to the growth. Despite a small decline in chargeable hours per fee earner of 0.7%, the figures suggest  a slight increase in rates has been achieved compared with the prior year.

The final quarter results were in line with the relatively strong annual performance delivered by the UK’s legal sector. Firms achieved a 6.6% increase in fee income for the financial year ended 30 April 2012, compared with the previous year. The 26-50 tier enjoyed the highest rate of growth at 9.7%, boosted by merger activity and the recruitment of lateral hires. Firms with an international presence saw some of their offices outside of the UK, particularly in emerging markets such as Asia, perform well. Furthermore, some firms achieved very strong results, despite the downturn, due to their focus on specific practice areas, such as litigation. 

Jeremy Black, partner in Deloitte’s professional services group, said: “The figures for the year show a positive level of fee generation, especially when considering the current financial climate. Nevertheless, firms have continued to face challenges as a result of intense competition, pressure on rates, and a transfer of risk through the increased demand for fixed fees.  The ability of law firms to control costs against a backdrop of high inflation will be key to maximising the profitability delivered by this revenue performance.”

Deloitte’s latest research also found that on average law firms are expecting growth to continue in FY12. They are forecasting an increase of 6.7% for Q1 and an annual fee income increase of 5.7%.

Black continued: “Firms are predicting a modest rate of growth for the coming financial year. It is not surprising that the legal sector remains cautious given the broadly stagnant domestic marketplace and questions over the future of the Eurozone. In addition, the sector is also grappling with unprecedented structural changes following the recent introduction of the Legal Services Act. This combination of factors is driving firms to review their strategy, organisational structure and future investments. As firms attempt to differentiate themselves to achieve a competitive advantage, we expect to see more merger activity as this is one route through which firms are able to broaden their service offering to clients, and win a greater share of clients’ legal spend.”