Law firms across the South are finding the business environment increasingly competitive.
Pressure on fees is a major issue despite optimism reaching its highest level since 2007, the year which marked the start of the worst financial crisis since the 1930s.
A survey by Smith & Williamson of more than 100 law firms from the UK’s top 250 reveals that eight in 10 firms are confident about the year ahead.
The figure compares to just six in 10 last year.
Firms with 25 partners or less appear the most upbeat, according to the research by the accountancy and investment management group, which has its South Coast office in Southampton.
Richard Green, Managing Partner at the South Coast office, is a sector specialist in professional practices, advising legal firms.
He said: “Signs of renewed growth in the economy generally look to be the primary factors behind these results, fuelling hopes that a more solid recovery is on the way.
“However, the environment has become more competitive in the last 12 months and pressure on fees is cited as the greatest challenge.
“Furthermore, almost nine in every 10 respondents expect to see greater competition as a result of the Legal Services Act.”
In response, firms are adopting a range of strategies. Some firms (39%) have set up a new service line in the last year, whilst 24% expect to do so in the next 12 months.
Richard said: “These approaches, in addition to the high number of lateral hires, suggests a focus on cross-selling services to existing clients and a need for an increasing level of diversification.”
Among other measures taken by respondent firms in the past year, 18% have sub-let office space, 15% have de-equitised partners, 14% have opened a new office in the UK, 12% have opened an overseas office and 11% have centralised functions.
Rapidly approaching is a major overhaul in the tax rules to hit partnerships from April 6, which will potentially add significantly to costs for firms and individuals alike, warned Richard.
“We expect that many partnerships will be affected by the rule changes, particularly larger partnerships providing professional services and especially those which include a service company, corporate member or salaried partners.
“Although the full details of the new rules have yet to be announced, firms must consider their options and work out a plan.
“The new legislation will affect each firm differently. This matter is now very urgent as it is just weeks before the new rules apply.
“Even smaller partnership need to check that they are not caught as the penalties could be severe if they are affected but take no action.”