The Lawyer UK 200 preview: Regional: North steams ahead in profit fightback
Northern and Midlands outfits overtake Southern firms as they recover after slump. Caroline Butcher reports
Recovery was the theme for UK regional firms in 2010-11, with many focusing on regaining ground after practice areas such as corporate and property were hit in the recession.
In the race to rebuild, firms in the North of England and the Midlands edged ahead of their Southern counterparts, with those in Manchester, Leeds and Birmingham reasserting themselves as profitable entities more quickly.
Board games
In the North West Liverpool-based Hill Dickinson, which recently scrapped its management structure in favour of a single LLP board, continued its steady revenue growth of the past five years. Turnover rose from £87.1m in 2009-10 to £100.1m, while revenue per lawyer (RPL) also crept up, from £225,000 to £233,000.
Average profit per equity partner (PEP) climbed from £248,000 to £272,000, but the firm’s profit margin slipped back slightly for the third year running from 15 to 14 per cent.
Meanwhile, Manchester-based DWF, which recently announced expansion into Birmingham and Newcastle, boosted corporate work by 35 per cent to see turnover surge from £71.5m to £83m.
DWF’s profit margin also rose, from 12 to 14 per cent, while average PEP was up significantly from £333,000 to £388,000 - although the glowing figures masked a drop in RPL from £204,000 to £189,000.
Despite its public sector clients being squeezed by budget cuts, Liverpool firm Weightmans forged ahead with a year of significant investment, including the acquisition of Mace & Jones and Vizards Wyeth’s insurance team in March.
But the expansion hit partner profits, with a decline in PEP from £354,000 to £298,000. Turnover edged up from £56.2m to £58.2m and RPL remained static at £165,000.
Pannone emerged as one of the North West’s losers of the last financial year, blaming restructuring costs for its lacklustre figures. The Manchester firm saw turnover slump from £49.5m to £47.5m, while RPL also slipped slightly from £232,000 to £228,000. Its profit margin dropped from 16 to 14 per cent and PEP tumbled from £229,000 to £208,000.
In the mix
The North East area and Yorkshire saw mixed fortunes, with partner-poaching rife and some firms being hit by low trainee retention rates.
While Leeds-based Walker Morris dipped slightly on turnover, down from £42.6m to £40.6m, it continued to boast one of the highest levels of RPL in the region at £245,000, albeit lower than last year’s £265,000. The firm also maintained a healthy profit margin of 34 per cent.
Newcastle-based Dickinson Dees had a rockier year, posting one of the lowest autumn 2011 trainee retention rates of just 36 per cent, while seeing its profit margin slump slightly from 19 to 18 per cent. The firm’s RPL dropped from £200,000 to £190,000 and overall turnover was down from £48.8m to £45.5m.
Looking at the headline figures, Newcastle’s Ward Hadaway had a more positive year, with both turnover and average PEP remaining reasonably static, at £28.4m and £295,000 respectively.
RPL remained unchanged at £184,000. However, the firm’s profit margin was low, at 11 per cent.
The past couple of years have been particularly hard for Midlands firms, with many in the increasingly over-lawyered Birmingham marketplace reporting falls in income during 2009-10.
The region’s biggest outfit, Wragge & Co, appears to be recovering from a dip in revenue in 2009-10 - mainly down to its property work - posting an encouraging revenue of £113.1m this financial year, up significantly from last year’s £96.2m.
Wragges’ profit margin remained relatively healthy at 34 per cent, while RPL stood at £247,000 and average PEP surged from £276,000 to £325,000.
The past year was also a good one for Browne Jacobson, which has hired steadily. The firm posted a record turnover of £35.2m, up on the previous year’s £33.1m.
The firm clinched new clients in the health and retail sectors, while boosting its partner headcount to 76. Its profit margin remained reasonably static at 13 per cent, with average PEP at £300,000 against an RPL figure of just £154,000.
Out West
The South West is also rebuilding after revenues at several Bristol firms dipped or flatlined during the recession.
Burges Salmon boosted its revenue to £66.1m after a tumultuous 2009-10 in which the firm turned over just £60.7m. RPL has also risen to £258,000 from £246,000. While profit margin was relatively stable at 33 per cent, average PEP tumbled from £414,000 to £395,000.
Bristol-based litigation firm Bond Pearce’s bounce-back is happening more slowly. It posted a modest increase in turnover from £46m to £47m, but its profitability moved in the opposite direction, with profit margin slipping from 16 to 15 per cent and average PEP withering from £235,000 to £220,000.
Blake Lapthorn, which saw its profitability plummet a couple of years ago, is also making a comeback of sorts. While its revenue has continued to slide to £44.3m, compared with £50.7m in 2007-08, it has managed to up its profitability in the past couple of years, with a 2010-11 margin of 14 per cent. PEP nudged up accordingly, from £116,000 to £138,000.
But things are still looking gloomy in the South East, where Thomas Eggar’s dreams of becoming a truly national firm have been hampered by an insipid set of financials. The firm’s profit margin slid from 21 to 18 per cent and turnover remained more or less constant at £34.2m.
Click table below to view TOP 10 REGIONAL FIRMS 2010-11
Readers' comments (17)
Anonymous | 15-Aug-2011 11:41 am
In my market (Newcastle) the perception is:
- Ward Hadaway & Muckle are slowly on the way up;
- Dickinson Dees & Watson Burton are yesterday's firms;
- Eversheds are, just about, holding their own; and
- DWF are biding their time before recruiting.
Overall the market is slightly over-lawyered. However fees are a bit too high so there will be some scrapping for work over the next 12 months.
I predict at least one of the top 8 firms in Newcastle going under within the next 18 months.
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Andrea | 15-Aug-2011 12:30 pm
Anon 11:41,
I think that's a pretty decent appraisal of the Newcastle legal market.
Too many solicitors have made it a buyer's market. I've noticed in the last ten years that the name of the firm now counts for little in Newcastle. It used to be that Dickinson Dees got work from the old banks and property companies because they had a working relationship going back for decades. That's now dying - these firms want value for money.
I think we'll see a large Newcastle firm go under within two years.
Watson Burton looks in a precarious position. Dickinson Dees seems to have become a very unhappy place to work and its financial results suggest the current crop of partners aren't as resourceful as their predecessors. Sintons should be added to the mix - there's little loyalty in the low prices market & it's likely charge out rates will drop soon.
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jh | 15-Aug-2011 1:47 pm
I'd tag WH in a mid-category between DD's and Eversheds, just about holding their own, but not the force they once were.
Other then that - I agree.
Ps- you forgot Beachcroft... I will summarise - "who?"
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Anonymous | 15-Aug-2011 5:44 pm
I guess it depends on what you mean by holding their own.
Imagine that a farmer owns a field full of cows. In one year most of them grew by 2% this year. One cow though isn't growing, indeed it has shrunk by 6%. I would say that cow isn't doing well, it's not holding it's own but shrinking.
According to the Lawyer's statistics, the turnover of Dickinson Dees dropped by 6.8% last year.
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Anonymous | 16-Aug-2011 9:50 am
sintons is a pi firm
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Anonymous | 16-Aug-2011 10:45 am
The next year will be very interesting for the Newcastle law firms. The likes of DD and WH will struggle to increase their turnover as DWF enters the market, as many of their clients are increasingly price sensitive at the expense of loyalty to their advisers, and are therefore likely to at least give DWF a try. In a stagnant North East market losing even a few decent sized mandates will make a big difference.
The threat to the existing Newcastle firms of a growing, aspirational firm entering the market should not be underestimated; I agree with earlier comments that at least one firm will go.
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icarus | 16-Aug-2011 1:32 pm
The arrogance of some of the North East firms means that you end up hating your solicitors. In my old work, if a big contract didn't go to a particular large North East firm, the client contact partner would bad mouth you around town.
I won't name the firm, but I think most people who have had dealings with them will know who it is. I'm so glad I don't have to deal with them anymore.
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Anonymous | 16-Aug-2011 1:56 pm
16-Aug-2011 9:50 am...
I think you missed out "ss poor" from your post.
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Anonymous | 16-Aug-2011 6:48 pm
The North East needs a couple more national firms.
It's a mystery that DWF didn't move up to Newcastle five years ago. If they had made the jump then they would be easily the biggest firm in the city by now.
It'll be interesting to see if any other firms spot easy pickings in the Newcastle legal market.
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Anonymous | 18-Aug-2011 4:16 pm
Are the North's firms in better health than those in the South?
Surely when clients have little money, cost becomes more important. The Northern firms tend to be cheaper.
Correspondingly the North is likely to be hit harder by the commoditisation of legal work. I think Newcastle firms are closer to the breadline and therefore are more likely to accept the buy out offers from the big supermarkets. Newcastle could be the Alternative Business Structure legal capital in five years.
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Anonymous | 19-Aug-2011 3:00 pm
Newcastle's firms face a bleak future unless they improve. Why shop locally when you get a better service elsewhere?
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Anonymous | 19-Aug-2011 3:05 pm
Interesting to read the other comments. I know others will disagree but personally I wouldn't pay to join the equity partnerships of either Watson Burton or Dickinson Dees at this time. I think both firms have quite a lot of restructuring to do before they become really competitive again.
Who do people think is the best merger target in Newcastle?
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Anonymous | 23-Aug-2011 2:58 pm
Profit fightback? Quite a few of the firms have dropped in turnover, which suggests things are worse for junior members of the profession.
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Anonymous | 2-Nov-2011 11:48 am
Has anyone heard a peep from DWF Newcastle?
Just what is the new Senior Partner doing if not (a) recruiting or (b) going out into the market to secure work?
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Anonymous | 2-Nov-2011 2:27 pm
I had big hopes for DWF freshening up the Newcastle legal market.
It hasn't happened. Maybe they need to get a few young ambitious partners into the organisation?
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Anonymous | 3-Nov-2011 11:00 am
Are Eversheds not counted as a regional firm?
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Anonymous | 3-Nov-2011 12:23 pm
Some good pickings for QS (or another acquisitive ABS organisation) in Newcastle at the moment.
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