There has been little revenue growth among Midlands firms over the past financial year, with four out of the five major Birmingham players reporting a fall in income.
The region’s biggest outfit, Wragge & Co, reported a fall in turnover of 7 per cent, from £103.4m to £96.2m. This was despite the addition of 45 lawyers, including 10 partners, from Lefèvre Pelletier & Associés in Paris at the beginning of this calendar year.
“No income came from Paris at all but [we had] millions of cost,” explained Wragges senior partner Quentin Poole, pointing to the fact that the French lawyers arrived late in the financial year.
He puts the overall drop in turnover down to a reliance on property, which accounts for 28 per cent of firmwide turnover, and on large corporates, many of which have sought to tighten their legal spend by bringing work in-house.
Still, he is forecasting that the Paris acquisition will boost the top line in the current financial year.
“Most firms are talking about flat budget for 2010-11, but we’re budgeting 20 per cent up,” he said.
As well as the Paris acquisition, Wragges absorbed the cost of making 32 redundancies. Average profit per equity partner (PEP) at the all-equity partnership dropped by six per cent over the period.
In contrast, the most dramatic increase in PEP was at Shoosmiths, where only 40 per cent of partners are part of the equity. The firm expanded net profit by 83 per cent and PEP by 70 per cent, while turnover fell by 10 per cent.
Chief executive Claire Rowe put this down to cost-cutting measures including 107 redundancies, a 3.5 per cent pay-cut for staff earning more than £25,000 and a part-time working scheme.
PEP growth was also substantial at HBJ Gateley Wareing, where equity partners will pocket an average of £302,000, around 50 per cent more than in the previous year.
What is particularly notable is a 76 per cent increase in the remuneration of the person at the top of equity. This increased from £456,000 in 2008-09 to £802,000 in 2009-10 and represents the package of a remaining partner. The bottom of equity grew much less significantly from £120,000 to £126,000.
The addition of a further 200 fee-earners from failed firm Halliwells after the end of the 2009-10 financial year is expected to bring turnover to £65m, but it remains to be seen how this will affect profitability.
Another firm that could perform differently next year as a result of a recent acquisition is Shakespeare Putsman. Its turnover fell nine per cent from £18.3m in 2008-09 to £16.6m in 2009-10.
However, Shakespeare Putsman recently merged with smaller Midlands firm Needham & James, which is predicted to create a £24m firm. Turnover fell by three per cent at Martineau over the past year from £21.2m to £20.5m. Senior partner Andrew Whitehead puts this down to a reduction in work in M&A and banking.
However, education (where Martineau acts for the Universities of Birmingham and Warwick) and energy (where clients include Npower and National Grid) contributed to PEP growth of 54 per cent.