Profit margins dropped for the fourth consecutive year at the top British law firms, despite a surge in revenue in 2017.

Equity-holding partners pocketed more cash, the annual report by accountancy firm PwC shows, because the firms reduced equity partner numbers in the top 25 firms.

“Silver circle” firms ranked 11 to 25 are closing the profitability gap on the top ten.

And the firms ranked fifty-plus are chasing hard and out-performing the mid-tier in the 26 to 50 bracket.

Almost 90 per cent of British law firms boosted their revenue last year though 32 of the top 100 firms saw a slump in profits.

PwC nevertheless describes 2018 as a strong year for the legal sector. He pointed to cost containment as an issue that has eroded profits. Staff costs continue to rise as a percentage of fee income.

Salary hikes

US firms are leading the surge in salary hikes and firms are battling to retain talent.

Non-fee earning cost centres are being tightly managed through controlling support staff headcount, PwC finds.