Law firms' soaring profits and the dominance of the ‘magic circle’, the City’s top five law firms, are set to erode, according to the findings of a survey by research company RSG Consulting.

The poll, conducted for law firm Eversheds, included the views of 50 partners and 50 company directors. The findings show rising fees and the cost of legal advice are key concerns for clients, who also questioned the value and delivery of a more costly premium service.

For the first time last year, all five magic circle law firms — Clifford Chance, Linklaters, Freshfields Burckhaus Deringer, Allen & Overy and Slaughter and May — had average profits per partner of more than £1 million.

According to the report, however, the sustainability of such profits and the dominance of these firms are in doubt, with more than a third of clients planning to buy legal services from firms outside the top five to get improved value for money and better service”.

Chief executive of Eversheds, David Gray, commented: “Partners in law firms need to question constantly whether what they are doing remains premium.”

Senior partner at ASB Law Russell Bell told M&A: “About 80–90 per cent of all legal work can be conducted by regional firms, which can provide a personal, specialist service that’s important to clients, and cheaper.”

“National law firms and the magic circle are struggling to provide both a specialist and general service to clients. It is the duty of the in-house lawyer or senior management to decide how much work can be done by a local, regional firm, and how much the more expensive, national firms need to be relied on.”

According to the report: “Controlling costs is a major concern for clients who are increasingly calling on their legal providers to justify fees, and more than half thought lawyers needed to be more commercial and align themselves to their clients' business. Many of those polled thought top law firm partners are out of sync with their clients, with only 21 per cent of them mentioning the need to control costs or add value as a concern.”