UK top 50 law firms drive profits back towards boom-time high
The UK's top law firms have overcome continued uncertainty in the global economy to achieve a second consecutive year of growth, while top 50 firms push partner profits back towards a boom-time high.
July 26, 2012 at 07:03 PM
4 minute read
Results 2012: consolidation boosts income of top law firms to nearly £13bn despite global economic woes
The UK's top law firms have overcome continued uncertainty in the global economy to achieve a second consecutive year of growth, while top 50 firms push partner profits back towards a boom-time high.
Legal Week's 2011-12 results show that revenues across the top 50 have hit £12.96bn – 5.6% up on the equivalent 2010-11 figure of £12.27bn. Top 50 law firms averaged income growth of 7.7% over the year.
However, much of the revenue growth was driven by consolidation, with five firms in this year's top 50 significantly adding to their fee income through domestic or international mergers.
Four of the fastest-growing firms by revenue undertook substantial mergers – including DLA Piper and Clyde & Co – with consolidation contributing to a 6% increase in total partner numbers across the top 50.
Firms on average grew profits per equity partner (PEP) by 4.2%, pushing average PEP across the top 50 to £587,000, against an all-time high of £616,000 in 2008.
In contrast, the magic circle were relatively subdued performers, seeing turnover and PEP growth of 2.1% and 1.6% respectively. Clifford Chance had the best year of the group, posting increases in revenue and PEP of roughly 7%.
The magic circle has now performed below the top 50 trend in income and PEP growth for three years running, though the five elite London firms' average PEP of £1.3m remains more than twice that of the top 50 as a whole.
Slaughter and May senior partner Chris Saul commented: "The macro-environment has, of course, been really challenging and, against that backdrop, law firm results which we have seen have looked encouragingly robust. This year has seen some law firm consolidation and, with the likelihood of on-going economic uncertainty, it would not be surprising to see that continue."
The top 10 London firms outside the magic circle also fell behind trend, posting average growth of 3.2% against profits growth of 7.1%. And, despite their best efforts to close the gap with their magic circle rivals, average PEP is less than half of their larger peers at £601,200.
Many of the standout City performers sit lower down the rankings. Among those to report the strongest results was Bird & Bird, which posted a 9.5% income rise, Olswang, which saw revenues climb by 16.7% and PEP rise by 21.8%, and Travers Smith, which saw a 16.4% increase in turnover against a 23.7% rise in PEP. Like top 50 new entrant Mishcon de Reya, all of these firms achieved the growth organically.
The results, which come in the week that it was confirmed that the UK has suffered the deepest double-dip recession for 50 years, will be seen as underlining the resilience of the commercial legal sector as firms face up to another year of turbulent trading conditions.
The four-year malaise in Western economies promises to underpin more global expansion as firms move to secure a competitive position in fast-growing Eastern economies.
DLA Piper joint chief executive Nigel Knowles commented: "The legal market remains difficult as the financial crisis continues to impact upon the traditionally strong markets. The economic shift continues and it is the firms that are able to establish themselves in rapidly growing markets, and become truly global in presence, that will be the most successful."
Click here for a 10-year overview of UK top 50 performance.
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