Last month saw many of the UK’s largest law firms reporting their financial results for 2022/23. Whilst the Magic Circle firms, Freshfields, Linklaters, Allen & Overy and Clifford Chance all reported increased revenue, this masked a trend which saw profits remain flat (or slightly down).
Profit per equity partner (PEP) was down by 5% at Linklaters, Freshfields saw a modest 1% increase and at Clifford Chance PEP dipped slightly from £2.04m to £2m. Across the board it seems last year’s bullish PEP growth is a distant memory.
Lacklustre profitability is likely to be repeated at smaller firms up and down the country given the UK’s challenging high-inflation environment and ongoing global economic and political instability.
The blame for this year’s flat profitability has been laid squarely at the door of increased costs. Clifford Chance’s Chief Financial Officer, Patrick Glydon, admitted that ‘Lawyer salaries are our largest cost’, pointing also to investments in real estate, IT, and business professionals’ salaries.
The profit puzzle
To quote a favourite accountants’ saying: Revenue is vanity, profit is sanity. So, what can law firms do to improve their profitability in the coming financial year?
The answer seems obvious – don’t just chase revenue, find more profitable revenue. But what does that look like?
At Global BPO we offer extensive document review services to our law firm clients encompassing eDiscovery and due diligence to support their corporate and dispute resolution teams.
Our experience of providing these services tells us that, when law firms use us, they are able to realise many benefits including:
Increasing their margins: We know that salaries for UK lawyers are significant and have grown substantially so that it is now rarely cost effective for lawyers to continue with process-orientated work. Law firms can offer competitive fixed fees to their own clients when they outsource document review tasks to our highly cost-effective staff, based in South Africa. This simultaneously allows firms to make an increased margin on this type of work and, as all businesses seek greater value in the current economic climate, keep their own clients happy by charging competitive fees.
Growing their market share: By outsourcing lower value tasks to us and offering more competitive rates, law firms are able to increase their market share through growth, retaining existing clients and winning new business.
At Global BPO we are proud to work in partnership with our clients to help them achieve their business goals. When it comes to solving the profit puzzle, we think we have the solution. So why not talk to us to find our more?
How can we help you?
For more information and to find out how we can assist your law firm, contact our Client Manager, Suzie Young, at: firstname.lastname@example.org.