The UK’s top 20 firms by revenue are gearing up for the recovery, with most expecting to see a turnover increase of at least 5 per cent for the year ending April 2014.
The expected revenue rise is in line with figures for the first six months of the current 2013/14 financial year, when firms reported growth across a wide range of practice areas and regions (8 November 2013).
The Lawyer quizzed UK top 20 firms last week on their year-end revenue predictions. The clear message was that 2013/14 was a busy but unexceptional year in which the commercial pressures on the UK’s largest firms continued to be felt.
“There’s more work, but that doesn’t mean things are more relaxed pricing wise,” said one senior partner at a top 20 firm. “It wasn’t a trophy year, it was an improvement.”
Firms just outside the top 20 also predicted increased revenues. Watson Farley & Williams co-head Chris Lowe said the fact that it is likely to be a relatively good year “snuck up on everyone,” though he warned that the market was unlikely to see any firm with results that would ”shock and awe” at year-end.
“The market remains tough, and different firms have different ways of reacting to that,” echoed one senior partner at a top 20 firm. “For that reason, I suspect there to be a great amount of variability in the results. One firm might have just had a large redundancy round, which will have a negative financial impact in the first year and a possible uplift in the second, for example.”
Just a handful of firms are predicting double-digit revenue rises, most of which are outside the UK top 20. While Olswang chief executive David Stewart said it was too early to say precisely how much revenues would rise, he forecast the year-end figure to be “up by around 10 per cent plus” when interviewed by The Lawyer last month (28 March 2014).
Meanwhile Ashurst’s chief financial officer Brian Dunlop said the firm expected to see both revenue and profit to be up on last year, based on the previous 11 months. The firm recorded a half-year turnover increase of 5.8 per cent to £298m, a rise it credited to stronger economic conditions and an uptick in transactional work (3 December 2013).
In terms of practice areas partners have pinpointed corporate, banking, finance and disputes as areas of growth. Employment and tax were mentioned as areas which were hit with difficulties last year.
”There is a greater confidence among clients, there is cash to be spent,” added another UK-based managing partner. ”There’s been strong growth in disputes and investigations, with significant recoveries in real estate, finance and corporate transactions. The M&A market has improved, but I don’t suspect capital markets has.”
Most stressed the strain firms continue to be under due to pricing pressures, with a number of partners saying that there was not a consistent view of what clients want.
“There is more work around, but that doesn’t mean clients are getting less demanding. Successful firms will meet these demands,” said one senior partner, who is currently looking at the firm’s pricing structures. “In terms of revenue growth, I’d be surprised if there was a strong trend one way or another [for 2013/14]. It was a satisfactory year in all circumstances.”
However Slaughter and May practice partner Paul Olney described the financial year as one of the firm’s busiest, with 2014 set to pick up further due to an increase in corporate activity and financing work.
”We’re busier than we’ve ever been as a firm,” Olney told The Lawyer. ”Since the financial crisis this is the strongest first quarter in M&A. Calendar year 2013 was also very busy year for IPOs. [However] IPO activity is starting to die down and the tech bubble seems less frothy.”
The turnover table for the UK’s 200 largest firms will be published in The Lawyer UK200 later this year.