Legal earnings still down on peak – a nation mourns

Look, I know a lot of you are going to be really upset by this news, but Partners  in top law firms are not doing as well as they were a few years ago. I know, I know...  tragic isn’t it?

But before you drown in a  sea of concerned procurement tears, worrying about those poor, struggling lawyers, just hang on a moment. According to the new PWC review of the top 100 law firms in the UK, earnings in the magic circle (top ten) firms were £951,000 on average per partner last year. Now that is well down on the peak of £1.1M in 2008, before the banking crash, but let’s face it, there aren’t many procurement directors  on  a quarter of that.

In the next tier of firms, numbers 11-25, earnings per partner were on average £480,000 in 2011/12 – down from £614,000 at the peak, which is a 31% decline in real terms. The top 10 firms now make margins of around 37% compared to 26% for the next tier – and that gap has widened over the last five years.

Whilst the global economic situation undoubtedly has had a major effect, has the increasing penetration of procurement into this category are played a part? Are procurement professionals beginning to get a better grasp of controlling expenditure in the sector, with a consequent reduction in earnings for the legal eagles?

It would be nice to think so, for the sake of our professional self-esteem, but although the numbers may be down on their peak, partners earnings still went up by between 5 and 10% for most firms from 2010 to 2011, which does not suggest tight procurement cost control with inflation running at around 3%.  However, it is worth nothing that there are 20% fewer partners in these firms than a few years back, which has helped them maintain earnings at a higher level per partner than would otherwise have been the case – that seems to be particularly true for the second tier firms.

That suggests another aspect that procurement needs to watch out for in our dealings with the legal services market.  The good news is that fewer partners in a firm may mean we’re less likely to see that level of expertise ( and level of hourly rate) used inappropriately, where they’re not really needed, to boost revenue on the assignment. But less positively, it could also mean junior staff have less supervision, support and top-level legal input from their bosses when it is needed.

So that is something for procurement – and indeed all users of legal services – to watch out for as the legal firms look to grow that all important profit per partner number.

(It looks like you may have to pay to get the full survey, but details are here anyway).

Visit our new search4 procurement jobs site for the best in procurement and supply chain vacancies!

 

First Voice

  1. Chris C:

    Given the traditional similarities of the UK legal system with countries such as India, South Africa and Hong Kong is this a category that procurement could quite easily look at offshoring?

Discuss this:

Your email address will not be published. Required fields are marked *