Law firms are still not investing enough in IT infrastructure and remote working, according to an annual survey conducted in partnership with Blackpool accountancy firm Moore and Smalley.
The annual legal benchmarking review from MHA, the UK-wide group of accountancy and business advisory firms of which Moore and Smalley is a member, points to a more positive outlook, helping ease the huge financial pressures in recent years.
However, higher property costs are exacerbating the lack of investment in IT systems and flexible working and so holding many legal practices back, according to the research. The report highlights:
n A year of growth in fee income across all sized firms, with growth of between 13 per cent and 27 per cent for firms with more than five equity partners.
n A direct increase in business in the property and construction sector.
n A lack of investment in IT accompanied by an increase in premises costs.
n External finance makes up between 20 per cent to 38 per cent of the overall finance invested in practices, the remaining being equity partner investment.
n All firms have been under pressure to make higher pay awards to retain staff.
The report also shows that improved fee income has not translated into increases in net profit.
Karen Hain, from Moore and Smalley, said: “A significant downward pressure on net profits is the high costs associated with keeping premises. It is clear from our review that firms have not downsized premises, with the larger practices actually expanding. To make any significant inroads, firms will need to change their way of working, such as hot desking, home working or paper free working. The lack of change in working procedures is echoed by the lack of real investment in IT spend.
“Indeed, productivity and time management are also key to a profitable business and a number of efficiencies can be gained through the use of technology and improved processes.
“As we look ahead, we expect 2016 to continue to see succession planning as a key risk for law firms. Difficult questions need to be considered about future strategy, so that changes can begin to be made. Firms also need to review their funding structures to understand their cash requirements, which usually fall under pressure during periods of growth. They must have plans if additional funding becomes necessary, as traditional banking routes may be restricted.”