It’s that time of the year again when law firms in the UK (at least those with LLP status) publish their annual accounts and, once again, it would appear that currency exchange fluctuations have played a significant part in the profit and loss (P&L) sheets of most with international operations (‘Currency woes hit growth‘ – subscription required).
As I pointed out back in March 2013, and then again in August 2014, the Australian operations of international law firms were not going to be sitting pretty when it came to reporting full year earnings in GBP or US$. At the time the experts were predicting mid 80 cents on the US$, and things can only be said to have taken a turn for the worse since then.
Failing a dramatic turnaround in commodity prices, it doesn’t take a genius to work out this will remain the same unless – or until – the Australian arm of international firms can muscle in on the [hopefully much more attractive US$] rates their offshore partners set up for them on advisory or transactional matters (see my post ‘Can a falling A$ make selling Australian legal services easier overseas?‘).
Alternatively, if you are an international firm with operations in Australia you could do what I have seen a number of firms doing during this reporting season and talk up you Australian earnings in “local currency contributions“. Because all things being equal, these firms have worked hard over the past 12 – 18 months to get their strategy on track and have most likely seen real growth in local currency contribution terms.