Finance

The most profitable small and medium-sized legal practices generate almost £1m in fee income per equity partner, nearly three times that of the least profitable, new research has revealed. It also highlighted the significant impact that gearing has on profitability.

It is not essential that the retainer between solicitor and client is in writing, the High Court has ruled. London firm Fladgate successfully sued client Lee Harrison for £63,332 in unpaid fees for work done in a corporate restructuring.

The recession and continuing economic challenges highlight the increasing importance of law firms having an effective business strategy in place that considers the ambitions of the firm but ensures that those ambitions are delivered against access to suitable levels of cash flow. By Legal Futures Associate NatWest

There has been a big rise in the number of law firms in distress, with the advent of alternative business structures (ABSs) set to make things worse, corporate recovery specialists Begbies Traynor have claimed.

Goodwill may start to reappear in law firms’ accounts as the prospect of external finance and the growing trade in legal practices drives a new push to put a value on them, a leading expert has predicted.

The number of incorporated law firms has risen sharply in the past year, with more than a fifth of legal practices now limited companies. According to Solicitors Regulation Authority figures, 2,400 of the 10,973 law firms as of July were incorporated companies, compared to 1,898 a year before – a rise of 26%.

Solicitors dispensing legal advice on a fixed-fee retainer should take care to clarify the terms and ensure the service they provide is the same as if it were paid for by the hour, following a High Court ruling.

Smaller law firms have halted the decline in fee income, while partner profits rose significantly last year, Law Society research has found. They saw an average increase of 0.2% in practice fee income in 2010, following a reduction of 6.5% the previous year.

Our regular round-up of snippets of news that you need to know takes in the Legal Ombudsman, conveyancing, financial difficulties for law firms, a shortfall of LPC graduates, the first divorce app, new members for LawNet, an LPO survey, the new Law Society deputy vice-president, and Expert Answers’ affiliate programme.

Solicitors in private practice undertook pro bono work in 2010 estimated at £475m, a rise of 19% on the year before, Law Society research has found. The figure represents 2.3% of the total gross fee income for private practice last year.