City law firms continued to defy the credit crunch by increasing revenues again in the first three months of the financial year, but growth slipped to less than half that of the previous quarter.

Figures produced by Deloitte, the business advisory firm, showed that the UK’s top 100 firms increased fee income by 6.3 per cent in the quarter ended July 31. That compared to 12 per cent in the previous quarter and 15.1 per cent in the first quarter of 2007-08.

The ten biggest firms continued to do well, achieving average growth in the last three months of 11.1 per cent, according to Deloitte’s quarterly Legal Sector Survey.

Yet while overall fee income has continued to increase, that was achieved by raising rates, the survey said. The volume of work performed remained static.

Jeremy Black, an associate partner in Deloitte’s professional practices group, said: “The sector faces a challenging year with tough economic conditions expected to continue for the foreseeable future.

“However, in such an environment average growth of over 6 per cent is still impressive and reflects the resilience of the industry to downturn.”

Mr Black said that most firms in the top 100 are forecasting revenue growth for the current financial year of around 7.5 per cent, with the top ten slightly higher at 8 per cent.

Last week, Legal Business, a respected trade publication, published figures revealing that the top 100 firms earned combined revenues of £13.96 billion in the past financial year, an increase of 14 per cent on the previous year.

Collectively they made £4.35 billion in profits, an average of £473,000 for each equity partner.

However, the magazine said that the record revenues were unlikely to continue.

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