UK operating and financial performance

2015 Annual law firms’ survey

This year’s survey presents a second year of stability and recovery for the UK legal sector. The number of firms increasing their UK fee income is higher than at any time since 2008 at 82%. However, even leaving currency challenges aside, Top 10 firms fared worse than all other bandings with only half of our respondents achieving UK fee income growth.


  • The number of UK firms increasing their UK fee income is higher than at any time since 2008: 82% (2014: 70%) of all firms. However, only half of Top 10 firms achieved fee income growth – the worst performance across all bandings.
  • The top 11-25 firms posted an impressive 4.2% increase in fees per fee earner. This compares to a small 1.3% increase for Top 10 firms and a 1.4% fall for Top 26-50 firms.
  • The sustained growth in net profit margin enjoyed by Top 10 firms over the period from 2011 to 2014 has stalled.
  • The Top 11-25 reported growth in net profit margin (by 1 percentage point), building on last year’s improvement after a period of deterioration from 2008 to 2013. The Top 11-25 performance has pulled them further away from the Top 26-50, which posted only a 0.4 percentage point increase to 24.5%. Top 51-100 firms reported their most significant fall in net profit margin in recent years, from 24.3% to 21.2%.
  • Top 11-25 firms’ improved profitability helped increase their average PEP by 17.2% to £641k. This represents, again, the most improved banding. In comparison, the remaining bandings of firms have increased PEP only marginally: Top 10 by 3.5%, Top 26-50 by 6.0% and Top 51-100 by 2.2%.
  • Fixed fee arrangements are becoming more prevalent across all bandings, particularly in the Top 26-50 and 51-100, where 32% (2014: 21%) and 38% (2014: 26%) of total fees are now under fixed fee arrangements.
  • In respect of fees and gross profit per chargeable hour, Top 11-25 firms are again the most improved - recording a 4.0% increase in fee income per hour and 5.3% increase in gross profit per hour.
  • Top 26-50 firms experienced a fall of 12.2% and 13.2% in fees and gross profit per hour and there is now little difference between this banding and Top 51-100 firms.
  • Profitability continues to improve for some firms, though only 46% (2014: 58%) of all firms generated increased profits at a rate ahead of growth in fee income.

A number of firms continue to struggle: 14% (2014: 7%) reported a decline in both fee income and profit.