Not bad as financial apocalypses go

If law firms' willingness to talk financial results is an indication of performance, then 2008-09 is certainly a very different year compared to what leading law firms have become used to. So while in a typical year, you have already seen a good selection of numbers by this point, this year it has taken Legal Week's entire news team to open the batting. Still, the general picture seems reasonably clear: major firms as a whole are set to be down in revenue against 2008, perhaps as much as 5%, while average profits will have fallen in the region of 15%. That's dramatically down on the growth seen over the last 15 years, with top 50 firms even in their TMT-hangover of 2002-03 managing revenue growth of 5.1%.

Still, overall figures say little, as 2008-09 has been marked by exceptional divergences in performance, in some cases even between comparable firms. Based on early indications, there will be a few top 50 firms in line for profits per equity partner (PEP) falls of more than 30% and 20%-plus profit drops won't be that unusual. Set against that, a considerable number of firms have apparently managed to grind out modest rises in revenue.

Divergences extend to the top echelons, where Slaughter and May appears to be on course to outperform its peers and Clifford Chance is braced for a particularly tough year. But there are clearer indications at major practices just below the magic circle, where many firms are set to hold revenue roughly static with modest falls in profits.

Assuming this general pattern isn't massively revised when the dust settles, what do these figures say in context? Well, it is clear that the UK market, faced with four more months of post-Lehman banking turmoil, has suffered far worse than US firms in 2008. But then they have also taken more of their pain and already moved to restructure.

The year will also be remembered as the first since the early 1990s in which legal services demand contracted. To lawyers grown used to a rapidly expanding market, it feels like the end of days, but let's keep a sense of perspective. For all the turbulence law firms have faced, they have proved adept at protecting their top line. And they remain, by any normal measure, extremely profitable businesses. While the underlying demand looks unlikely to rebound much, if at all, in 2009-10, with heavy cost-cutting under their belt, UK firms are well placed to handle the challenges ahead. Good for them – these are well-run businesses. Nevertheless, the wilder claims made about the current vulnerability of law firms have provided handy cover. There could be some awkward discussions when it becomes clear the extent to which their businesses diverge from harder-pressed clients.