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Scotland's law firms are more confident but there is some caution about the market, according to a new survey.

The analysis - by industry advisors PKF - looked at the top 30 legal practices in Scotland in 2011.

Half of those surveyed said their financial performance was broadly on budget or exceeded their expectations.

One third of the firms reduced their staff during the past year compared with 63% in 2010 - but 31% recruited more staff.

Almost all said they were concerned there would be no sustainable recovery in the commercial and residential property markets for the next 12 to 18 months.

More than 80% of firms also said that clients wanted to negotiate reduced fees.

The survey found little enthusiasm for changes contained in the Legal Services (Scotland) Act 2010 which allows external investment and the introduction of non-lawyers into firms.

Almost two thirds of firms said they had not held formal discussions among partners.

Charles Barnett, professional services partner with PKF, said: "We can see there has been a significant improvement in the legal market in 2011.

He added: " There is unlikely to be a return to the 'good old days' pre-2008 so it is important that firms realise this, develop strategies for growth in the new economic environment, and recognise the legal sector as it is rather than as they would want it to be.