The ongoing restructuring within Stephenson Harwood appears to be showing results after the firm increased profitability for the second year in a row.

Last year the firm continued to implement its strategy to refocus on areas of strength, in particular banking and finance. It hired a new head of Islamic finance from Calyon (formerly Credit Lyonnais) and saw the managed loss of its entire private capital and family team to Charles Russell last year. Such changes helped average PEP to increase by a staggering 20 per cent, reaching £280,000 last year. That followed a similar 17 per cent rise in PEP in 2003-04.

However, at the same time, the firm's turnover lost more ground, dropping 4 per cent from £58.6m in 2003-04 to £56m last year. It was the second consecutive year that turnover slipped following an 8 per cent revenue drop in 2003-04.

But despite the declining turnover, the firm remains adamant that the restructuring is showing results, pointing to an increase in fee income for the banking and asset finance practice of 140 per cent in the last three years.