Many law firms in the Midlands have seen profits tumble on the back of an expansion drive, it was claimed yesterday.
According to the PricewaterhouseCoopers 2005 Financial Management in Law Firms survey, 64 per cent have seen fees billed per equity partner increase.
But 48 per cent have seen a decrease in the profit available for equity partners after taking on more staff.
Midland law firms under-went the highest recruitment push in 2004 compared to the rest of the UK, with 64 per cent increasing their number of equity partners and 73 per cent reporting a jump in fee earners.
As well as recruiting more staff, Midland employers are successful at retaining people, when compared to other parts of the country.
Firms in London saw the highest level of change, with 76 per cent of firms experiencing turnover in excess of ten per cent. The Midland equivalent was just 40 per cent.
Looking at the year ahead, Midland law firms are upbeat and predict recruitment will continue, with nearly half expecting their number of equity partners to rise. Likewise, 64 per cent of Midland firms expect profits per equity partner to increase during the next 12 months following this investment in talent.
David Waller, Midland chairman of Pricewaterhouse-Coopers, said: "It looks likely that firms in the Midlands will continue to face tough market conditions in 2005 and must continue to keep a tight reign on all costs. However, although this helps their profitability, it does cause problems around reward and motivation.
" The Midlands has improved its staff retention rates over the last 12 months and this should remain the focus. Firms need to consider new and innovative methods around staff retention, when the traditional options of promotion and admission to equity partnership are restricted. The successful firms will be those that continue to control their cost base whilst at the same time strategically growing their revenues.
"We would expect to see the average chargeable hours of a newly qualified lawyer closer to a minimum of 1,500 hours per annum. There is an opportunity here to better utilise existing staff at all levels - hugely important when firms are looking to reduce staff costs."
The survey also found that risk management continues to move higher up the agenda at the largest law firms.
