Law Update: Fluctuating fortunes

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The fortunes of provincial law firms improved in 1993, but those of London firms took a turn for the worse. The data, from the Centre for Interfirm Comparison, foresees little improvement in 1994. The study is based on 150 volunteer firms.

The latest information says that the average level of profitability of London firms fell sharply in 1993. Three years ago, the typical profit per partner was pounds 100,000, which dropped to pounds 72,000 last year. The only firms that escaped the fall were litigation specialists. In previous years, profits were maintained only because revenue per head continued to rise, offsetting the fall in margin. Last year, revenue per head stagnated and rising costs cut into profit margins, which fell two points to 17 per cent.

Commercial work continues to be the most profitable activity for London firms. The picture in the regions is brighter, although profits have recovered only to mid- 1980s levels. Profit margins also improved, but at 10 per cent remain the lowest they have been in any year except 1992.

Most of the modest 5 per cent growth overall came from litigation, in which a 10 per cent rise helped offset a further fall in conveyancing revenue. Conveyancing now accounts for only one-third of revenue for provincial firms and has become the least profitable type of work.