Despite political uncertainty UK law firms have added 307 partners, but is it an increase or a correction?
UK law firms added a net 307 new Partners to their ranks in 2017/18, compared to a net increase of just 17 Partners the year before, says Hazlewoods, Chartered Accountants and Business Advisers, specialists in the legal profession.
The increase in the number of lawyers being promoted to the top ranks of law firms comes despite concerns that uncertainties around Brexit could hit law firm growth in areas like M&A, corporate finance and commercial property work. Recent research shows that the UK’s Top 100 law firms generated a record £24.1bn in revenue in 2017/18, a rise of 10% on the previous year. A total of 4,594 lawyers became partners at law firms in 2017/18, compared to the 4,287 who either left or retired from their positions in the same year. The increase in the number of new partners in the last year may also be a correction to the low number of new partners added in previous years.
Andy Harris, partner at Hazlewoods, says ‘strong revenue growth allows law firms to reward associates with a position in the partnership. Without a growth in profits existing partners are much more reluctant to dilute their own equity stake by adding to their ranks. An active recruitment market for lawyers can also lead to more partner promotions. An expectation of a future partnership position will often make it harder for a lawyer to leave their firm. It will also help stop a lawyer joining another firm that has offered them a partnership.’ This year’s increase in the number of partners is the fourth consecutive year of growth. Partner numbers in the sector had dropped sharply in 2013/14, by 778 Partners, the same year as changes to partnership tax rules made it less tax efficient to promote lawyers to a ‘salaried’ partner position.