Law firms may have to cut thousands more solicitors to restore profits to pre-2008 levels, according to Royal Bank of Scotland’s 2012 review of the legal profession. The report says that at least 5% of fee-earners may have to be culled.

The report concludes that firms of all sizes can look forward with optimism to new challenges in the sector, but staff numbers have to come down if firms want to be competitive. ‘Firms must be prepared for restructuring and have a plan of action in place to enable them to respond effectively to adverse business conditions,’ said James Tsolakis, head of RBS’s legal services division.

Three years ago some of the UK’s biggest firms shocked the City market with swingeing cuts across all levels, from support staff to senior partners.

Tsolakis said the market faces a range of pressures in the coming months, not least the contraction in demand, sluggish economic conditions and the threat of new entrants.

The review stated that more national firms will look to expand abroad and more international mergers are inevitable. More boutique and niche firms will pop up, with private equity investments also encouraging new models to rival the traditional partnership formula.

Tsolakis concluded he was ‘immensely optimistic’ about the future of the profession in the UK - so long as leaders are willing to adapt to new challenges.