• Partner pay has increased 35% in the last five years
• Law firms doing more to ensure fee-earners take on premium work
The average annual earnings for partners at UK law firms has broken through the £200,000 barrier for the first time*.
We have found that the average earnings for law firm partners reached £201,000 last year, which is up 7% compared to the previous year (£187,000) and 35% versus five years ago (£149,000 – see graph below). The figures are based on earnings of both equity and fixed share partners.
The increase in earnings reflects the continued growth of the UK’s legal sector in recent years, which has been less affected by Brexit than originally feared. Whilst law firm partners’ earnings took a big hit from the recession they have now more than made back that lost ground.
Key revenue areas for larger law firms such M&A, corporate finance advisory and real estate have remained buoyant up until Q4 2018. However, low levels of corporate finance work in Q1 and a weaker property market may take some of the wind out of their sales.
Partner profits have been helped by law firms being relatively careful not to create too many new partners. New partners can dilute the earnings of existing partners if their numbers grow much faster than profits. For the five years up until June 2018, UK law firms only created a net 94 new partners in total (new partners less partner retirements).
We have found the increase in partner earnings has also been helped by law firms automating or outsourcing labour intensive tasks to free up time for fee-earners to take on more premium work with high hourly rates.
Andy Harris, Partner says: “UK law firms learned a lot of lessons from the last recession. They run much tighter ships and are more efficient at converting hours worked into bills which are paid.”
“Expensive new office overheads are taken on with more care and diversification efforts that fail aren’t allowed to run at a loss for too long.”
“That efficiency drive within the UK legal sector is making a real difference to partners’ incomes.”
“That isn’t to say that the next recession won’t hurt - but hopefully it does mean that it should be less painful for firms.”
* HMRC data, based on earnings of self-employed solicitors