Top 50 maintains iron grip on equity to boost results
Elite firms bring in combined revenues of £9.3bn as number of partners remains at a constant
July 19, 2006 at 08:03 PM
3 minute read
The UK's top 50 law firms have achieved dramatic growth in both turnover and profits against little or no increase in partner numbers as leading firms continue to stretch leverage.
The results show that while the vast majority of firms have managed to convert the active markets and flood of M&A work into significant increases in revenues and profits per partner, the number of partners – and the number of fee earners generally – is barely up on last year.
Combined, the top 50 firms have managed to bring in revenues of £9.3bn compared with just under £8.3bn last year – translating to an average increase in turnover of 13.1% compared with an 8.2% rise last year.
Against this, the average number of partners per firm has only risen by 2.6% and for both the magic circle and the top 10 City firms this figure drops further to a less than 1% increase.
Even more significantly, firms have yet to relax their iron grip on equity, with the average number of full equity partners at a top 50 firm falling from 104.6 last year to 103.9. The top 10 City firms lost 26 equity partners between them with only Allen & Overy and Herbert Smith bucking the trend to increase their equity partnerships.
Tony Williams of Jomati consultants commented: "There are more people coming off the end of the conveyor belt, either because they are retiring or being pushed, and those coming in at the bottom are often non-equity. Equity is still being tightly reined and partners leaving are not being replaced one for one."
Fewer than half of the top 50 firms have increased their overall partner numbers and the bulk of those that did were mid-tier or national firms such as Addleshaw Goddard and Bird & Bird.
Of the top 10 City firms Simmons & Simmons, Herbert Smith and Linklaters were the only firms to boost their overall partner numbers.
Nick Eastwell, head of capital markets at Linklaters, told Legal Week: "We all run leaner and meaner businesses than we did 10 years ago.
"We try to get more out of individuals than we did before and productivity per lawyer has increased, not least through economies of scale. That said, we are still seeing growth in overall numbers, albeit outweighed by growth in revenues and profitability."
On average, leverage increased throughout the top 50 this year, from 6.09:1 last year to 6.26:1, despite the surge in commercial activity. This means that despite the increase in work, total lawyer numbers across the whole of the top 50 have only increased by 329 – from 36,418 last year to 36,747 this year.
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