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Law firms are growing increasingly confident about the year ahead, but any optimism is still guarded.
According to a survey carried out by accountancy firm Smith & Williamson, 58 per cent of respondents are ‘very confident’ or ‘reasonably confident’ about the year ahead, up from just 50 per cent 12 months ago.
It also shows that 84 per cent of firms have reduced staff costs or are in the process of doing so as they take steps to minimise the effects of the recession.
Perhaps more worryingly, 63 per cent of respondents claimed that the time lag between invoicing clients and payment has deteriorated. Meanwhile, more than half of those surveyed cited pressure on fees as a key issue.
The survey involved managing partners, financial directors and equivalent at 121 firms, including 59 from the top 100.
The worsening financial situation at many firms has also resulted in an increasingly troubled relationship with banks. Over a quarter of firms said the relationship with their banks has become more difficult compared with last year, while 41 per cent reported less favourable borrowing terms.
Giles Murphy, head of assurance and business services at Smith & Williamson, said: “The rise in confidence since last year suggests that law firms are seeing the first signs of an upturn, even though swathes of the economy are struggling with recession. However with more than half of firms (55 per cent) claiming pressure on fees and 40 per cent stating that managing cash flow is an issue, it’ll be a long time before firms return to the heady days of 2006 when 98 per cent of law firms described themselves as ‘confident’ about the year ahead.”
Of the firms that responded to the survey, 21 per cent had more than 100 partners, with nearly half boasting at least 50.