With the Midlands fast becoming a magnet for the UK’s legal industry, Corinne McPartland queries whether the region can sustain so many law firms
Last year saw a succession of new arrivals in an already crowded Midlands legal market add to the scramble for roles on deals worth less than £5m, particularly in Birmingham, the area’s main legal centre. With the recent economic crisis leaving no firm unscathed, there is now a very big question mark over whether the area can sustain such a cornucopia.
Newcomers to Birmingham include a bevy of Midlands firms widening their nets, such as Nottingham’s Browne Jacobson and Freeth Cartwright, Leicester’s Harvey Ingram and Northampton’s Shoosmiths. But there were also debuts from a host of firms that had no previous presences in the region, including Bristol’s Bevan Brittan and Beachcroft, Cheltenham’s BPE Solicitors and Norwich’s Mills & Reeve.
BPE proved critics right after it closed its newly acquired Birmingham office in May following the departure of a 10-strong team to Irwin Mitchell’s longstanding Birmingham office. BPE reported a firmwide drop in turnover this year, from £8.7m to £7.1m.
It has also been a tough year for Freeth Cartwright after the firm opened its fifth office in Birmingham, with a particular focus on real estate. This year it posted an average profit per equity partner (PEP) of £150,000, a 36 per cent drop on the previous financial year’s £233,000. Turnover at the firm also fell to £32.6m, a drop of 3 per cent.
Surprisingly, despite its unsavoury financials, the firm says it is looking to invest in the expansion of its mainly Midlands-based practice into London later next year.
Shoosmiths has also had a turbulent year. The firm reported a 54 per cent drop in PEP for the 2008-09 financial year, down to £151,000 from £327,000. Total revenue was also down, by 4 per cent, from £103.4m to £99m. Some 25 fee-earners as well as 44 support staff were made redundant during its restructuring programme earlier this year.
Shoosmiths had boosted its Birmingham income by 20 per cent in just six months during the previous financial year after hiring a 31-strong social housing team from Cobbetts along with the team’s entire client list in March 2008.
Now, with chief executive Paul Stothard stepping down to make room for litigation partner Claire Rowe, the firm will hope to see an improvement in its results.
Beachcroft has also seen a dip in firmwide profit, albeit only of 2.9 per cent. PEP fell slightly, from £310,000 to £301,000, at the 2008-09 year-end. But Beachcroft’s Birmingham outpost, which focuses purely on litigation and insurance, contributed 8 per cent of the firm’s turnover, while staff headcount in the office increased from 184 to 210 during the past year.
The flip side
Despite all the doom and gloom there have been a few success stories in the Midlands legal market.
Bevan Brittan managed to escape any major financial haemorrhaging thanks to the significant practice areas of employment, health and dispute resolution it runs out of its Birmingham practice.
The Bristol-headquartered firm broke through its profitability target, reporting a total profit at the 2008-09 year-end of £8.6m, up from £5.5m the previous year.
It also managed to hold on to major clients, including Birmingham City Council, West Midlands Strategic Health Authority and University Hospitals Birmingham NHS Foundation Trust.
Mills & Reeve also managed to weather the storm, reporting a 7 per cent revenue hike for the past financial year.
The Norwich-based firm grew revenue from £62.5m during the 2007-08 financial year up to £66.6m. PEP saw a 2 per cent hike, from £295,000 to £301,000.
HBJ Gateley Wareing’s strategic mergers and the opening of its first international office in Dubai took its toll on profit last year, with the firm reporting a 24 per cent drop in PEP, from £268,000 to £203,000.
Meanwhile, Birmingham heavyweight Wragge & Co also saw a decrease in profit. For years a key plank of the firm’s strategy has been to use its London office as a beachhead to target FTSE250 clients and then funnel work back to the Midlands to take advantage of its lower cost base.
But despite keeping hold of some of the top clients in the region, such as Cadbury, Wragges has seen its PEP plummet from £483,000 to £292,000 and turnover drop from £125m to £103.4m.
The coming year should highlight those firms that can adapt best, not only to the tough market conditions, but also to an increasingly crowded region.