UK law firms see billable hours fall as sector struggles with inflation
The UK’s biggest law firms are concerned by a fall in billable hours this year as they struggle to cover cost pressures from inflation through pricing, according to a survey obtained by the Financial Times.
PwC’s annual law firm survey, which City PM understands will be published on Tuesday, reportedly notes a slowdown in mergers and acquisitions over the past year against a backdrop of rising inflation and the cost of living.
The survey finds that the cost of staff and support functions is growing faster than income from fees.
Equity partners at the biggest firms saw their billable hours fall by 8.3 per cent.
Tech company Big Hand found last December that 98 per cent of UK law firms increased their billable hours targets.
“Firms have achieved fee income growth but in the context of high inflation and reducing profit margins,” Kate Wolstenholme, leader of the PwC advisory group that conducted the survey, told the FT.
“Going forward, firms will need to consider cost control in the context of more radical changes to their future operating model,” he said.
The survey lists macroeconomic uncertainty and cyberattacks as other major issues facing the sector.
City PM reported in August that the the UK’s top 100 law firms waited an average of 124 days to get paid, highlighting potential cash flow issues if the economy tanks.
The top 10 UK law firms told PwC that competition from US giants with offices in London was a main threat.
UK firms are considering hiring new talent and more commercial training to encourage growth.
None of the firms surveyed are making near-term plans for alternative funding or ownership, although a small number are considering minority investment.
The survey notes that while using AI to boost efficiency is being widely discussed, few firms “have taken meaningful steps to capitalise on the opportunity”.