The PwC Law Firms’ Survey 2018 reports that profit margins at the top 10 firms have fallen to 36.6 per cent, down from 36.9 per cent in 2017 and 40 per cent in 2014.

The shift has been blamed on an increase in staff cost as a percentage of fee income from 38.5 per cent to 39.4 per cent among the top 10 firms.

Only one UK top tier firm managed to narrowly exceed the average profit margin performance for all US top tier firms of 45.9 per cent.

However, improving performance among the top 11 to 25 firms meant they were beginning to close the “profitability gap”.

Overall, 89 per cent of UK law firms of all sizes have seen income growth over the past year, with 40 per cent of firms reporting double digit growth.

Commenting on the survey, David Snell of PwC said: “With Brexit looming large on the horizon, levels of uncertainty continue to increase. Whilst the overriding sentiment is that of resilience through change, law firms need to continue to look to the future, ensuring they continue to adapt to a rapidly changing world.”