Post-crunch equity count dives despite broader partnership growth

The proportion of equity partners across the UK top 20 is continuing to shrink as law firms tighten their grip on the equity amid ongoing pressure on profits.

The UK's 20 largest law firms by revenue have seen the overall proportion of equity partners fall by 12% over the last seven years, with equity partners accounting for 59% of the total partner count in 2012-13, according to Legal Week research.

While the number of partners across the top 20 has risen by 31% since 2005-06, the number of equity partners has grown by just 15% over the same period.

However, the magic circle has gone against trend, posting a collective rise in equity partner proportions from 81% in 2005-06 to 85% in 2012-13. 

Linklaters in particular has made strides towards a full-equity partnership, with its percentage of equity partners increasing from 77% to 94% in the seven-year period, during which Clifford Chance (CC), Slaughter and May and Allen & Overy have also seen their proportion of equity partners increase.

Slaughters corporate partner Nigel Boardman said: "It is possible that firms at the top end often decide to make culls instead of de-equitisations, resulting in much higher percentages of equity partners. It might also depend on the nature of work the firms focus on – litigation and M&A lawyers could move into the equity quite early, while firms focusing on other practice areas might be able to settle for more salaried partners."

CC senior partner Malcolm Sweeting (pictured) added that top-performing firms may be more confident about investing in their partnerships. "While there hasn't necessarily been a conscious trend toward expansion, the firms at the top end of the scale will have the business plan and confidence to invest for the future," he said.

Disregarding the magic circle, the proportion of equity partners across the top 20 fell from 56% to 47% over the seven-year period.

Firms to have seen the most significant changes include CMS Cameron McKenna, which moved away from its all-equity structure in 2007 with the introduction of a salaried partner tier, resulting in a gradual reduction in equity partner proportions to 50%. However, the firm this year scrapped its salaried partner rank, creating a two-tier partnership comprising fixed-share and full-equity partners.

Senior partner Dick Tyler said: "Our non-equity partners now all share in the firm's profits, which we think is important in creating a cohesive partnership and giving everyone the same incentive."

Other firms to have seen notable changes in their equity partner proportions include DAC Beachcroft, down from 65% in 2005-06 to 47% this year, Ashurst, down from 82% to 64%, and Irwin Mitchell, down from 54% to 39%.

Eversheds managing partner Lee Ranson said: "The figures are I'm sure affected by the relatively low-growth environment we have seen across the sector in the last few years. In such circumstances, firms want to ensure that business cases are sustainable."

Equity partners – key stats

Proportion of equity partners at top 20 in 2005-06 – 67%
Proportion of equity partners at top 20 in 2012-13 – 59%

Proportion of equity partners at magic circle in 2005-06 – 81%
Proportion of equity partners at magic circle in 2012-13 – 85%

For more comment, see An equitable life? Slightly larger pie, fewer slices.

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