Small firms are positive about the future of their business with one-third of practices outperforming revenue expectations, according to research published today - but there are signs that the immediate upturn after lockdown may be slowing down.

Business confidence levels have returned to pre-pandemic figures, a report by LexisNexis found, with 91% of small firms reporting confidence about the future – a slight drop from 93% last year, but one which the legal publisher said is ‘more likely the aftermath of the post-lockdown legal boom’.

The annual Bellwether report, based on a survey of 345 small firms and sole practitioners, also found that 33% of respondents said their revenue for 2021 financial year was higher than projected, with 17% saying that it was below expectations.

Just over half (51%) said their firm is growing compared to performance three or four years earlier, a decrease from 66% last year and 57% the year before which LexisNexis said ‘[hints] that the post-lockdown boom that came to define 2020 and 2021 has come to an end’.

Lexis Nexis also warned that practices still face external challenges, in particular salaries and indemnity insurance which was described as the most significant operational cost pressure in the last 12 months by 56% and 41% of respondents respectively.

The survey found that attracting and retaining talent is one of the key threats facing small firms, with 49% saying it is their biggest challenge and 18% of respondents expressing doubt about being able to compete effectively for talent over the next two years.

The majority of those responding to the survey reported high levels of job satisfaction, balancing out to an average of 7/10, though stress levels were also high with an overall average of 6/10.

LexisNexis said work-life balance was the most important factor for lawyers considering moving firms on 41% followed by firm reputation on 31%, while only 2% put a firm’s climate change policy top of the list and just 1% cited diversity and inclusion initiatives.

Small firms are also more open to mergers and acquisitions, with 16% saying this was part of their current growth strategy and 21% reporting that the pandemic had made the option more attractive, up from 14% the previous year.

 

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