Most law firms in Bristol have increased their profits over the past year – but they need to refocus on ensuring their long-term financial stability, new research shows.
Fee income for legal firms in the city increased by an average of 4.1% last year, according to the research by the Law Society’s Law Management Section (LMS). The average profit per equity partner rose by 3.6 per cent to £121,731. 
And while more Bristol practices converted to a limited company or LLP status last year, there was a fall in equity partner capital, with some firms overdrawing profits.
The key findings emerge from the LMS’s annual financial benchmarking survey, sponsored by Lloyds Bank Commercial Banking. The survey, produced by Cheltenham accountants Hazlewoods and now in its 14th year, reveals the health of law firms across the UK.
Other key findings from the survey were:
- a stability in ratios of fee earners to partners, secretaries and support staff
- Total lock up (work in progress and debtors combined) down slightly to 177 days
- For 21% of participants, partners’ total drawings (including income tax) exceeded profits in both 2012 and 2013.
Lloyds Commercial Banking relationship manager in Bristol, Craig Baldwin, said: “This year’s survey shows some positive trends, including growth in fee income and profits. It was pleasing to see some firms improving their working capital management, too.
“We are beginning to see some positive indicators that bode well for the economy in 2014, and solicitors are likely to get busier with a revival in house move transactions and rising levels of confidence among their business clients. However, solicitors in Bristol and Somerset will need to maintain financial discipline for sustained success.”
Law Society president Nick Fluck said it was encouraging that law firms’ profits continued to modestly rise.
“But there’s no one-size-fits-all approach that will help firms to adapt to the tough conditions facing the sector today,” he added.
“The LMS survey provides an invaluable insight into management structures which can help firms to formulate strategies and allocate resources to ensure financial stability.”
Hazlewoods director Andy Harris said the results showed that many firms were continuing to exercise tight control over spending where possible, even though staff costs were beginning to increase again.
The LMS survey is an annual health check for the financial stability of small to medium-sized law firms, providing an opportunity for firms to evaluate their performance against regional and national comparisons.
