With Linklaters and Freshfields Bruckhaus Deringer this week becoming the last of the magic circle to reveal their financial results for 2013-14, it's high time to assess the relative fortunes of the UK's leading firms.  

As a group, the magic circle firms (excluding Slaughter and May, which does not reveal financial information) generated more than £5bn in revenue during the last financial year, a 4% rise on 2012-13. Clifford Chance's (CC) revenue growth of 7%, up to a record peak of £1.36bn, was the highest of the group. Linklaters posted a 5% rise to £1.26bn, with more modest hikes of 1% and 2% for Freshfields and Allen & Overy (A&O), up to £1.23bn and £1.23bn respectively.

"I'm not entirely surprised by CC's performance," says former managing partner Tony Williams. "The firm had lagged behind before so they were due a bit of a catch-up, and have been working hard to make sure they do."

But revenue increases do not tell the whole story. In terms of profit per equity partner (PEP), CC (£1.14m) still ranks behind leaders Freshfields (£1.48m) and Linklaters (£1.39m), and only just ahead of A&O (£1.12m). Even more significantly, CC's profit margin (34%) was comfortably the narrowest of the big four. Freshfields led the way again on this front, coming in at 47%, giving it the largest net income of the group: £578m compared to CC's £459m. 

"CC is notorious for cutting its price to secure mandates," claims one former magic circle partner. "Sometimes it's going to levels that really aren't profitable. But what's happened with Freshfields is that, while it traditionally allowed partners quite a lot of discretion in pricing jobs, the firm figured it was leaving too much money on the table that way, so there are more central controls on how the firm prices products now."

Both Linklaters and A&O saw net income grow by 7%, while their profit margins were within a percentage point of each other (44% and 43% respectively). 

Freshfields in particular has benefited from a resurgent M&A market in the last year, topping Mergermarket's European and UK rankings, advising on 96 deals worth $239bn (£139bn) over the first six months of 2014 alone. Financial investigations work is also on the rise across the board, and, according to several former partners, is proving to be another highly lucrative source of income for Freshfields.

In terms of partner headcount, not much changed at the big four during 2013-14. CC remains the largest firm in terms of total partners, growing very slightly from 587 to 589 between last May and May 2014. Freshfields, with the fewest partners of the magic circle, went from 429 to 428 over the same period.  The relatively flat headcount numbers suggest that improved profitability has come about because of cost saving elsewhere in the businesses. 

Variations in how tightly the equity is held across the firms is also a vital metric as a high value at the top end can be used as leverage to attract lateral partner hires. Although Linklaters has a lower average PEP than Freshfields, for example, the top of its equity ladder (£1.63m) was around £100,000 higher than Freshfields' last year, with the bottom rung also ahead of its rival firm. 

A&O has historically had a shorter equity ladder than its peers, but this has widened slightly between the 2013-14 financial year and the one previously. It topped out at £1.67m last year, up from £1.57m the year before, and bottomed out at £669,000, up from £627,000; the resulting increase in range being £64,000. CC does not release figures for its range, arguing that it can provide a misleading impression of equity distribution.

"The cost base is not very different between the firms, broadly speaking," a former Freshfields partner argues. "So you need to look at the range of profitability – at how PEP is distributed across the firm. The top of the range is currency for lateral hires, but it depends on how many junior and senior partners there are."

Despite the differing equity ladders, each firm saw its fair share of comings and goings among their partnerships last year. A&O grabbed Freshfields corporate partner Toni Valverde to lead its newly launched Barcelona office in February, Freshfields poached Linklaters capital markets partner Arun Balasubramanian to co-head its India practice last July, and Linklaters and CC both had their private equity practices raided from the outside at various points over the period.

Even given the range of comparators available, booming top-line revenue at CC is hard to ignore. But judging whether the firm is ahead or behind the competition depends on how one compares revenue growth with metrics like PEP, revenue per lawyer or the top and bottom ends of the equity ladder. 

Whatever the commentariat makes of the ongoing battle for supremacy, management figures say they would prefer to concentrate on what they're doing internally, as opposed to allowing comparisons with other firms to drive strategy.

"Our principal focus is on our clients, delivering outstanding quality and providing global coverage," says Linklaters managing partner Simon Davies. "If we are successful in that focus, good financial results relative to our peers will naturally follow."

What will come to differentiate the quality of the firm in the future, according to Davies, is not just the bottom line, but less quantifiable aspects such as gender diversity and developing and training talent. As if to illustrate his point, Linklaters became the first magic circle firm to introduce gender diversity targets this June.

As a collective, the magic circle has come through the financial crisis in good health, and relatively small 1% and 2% revenue rises at Freshfields and A&O respectively last year won't phase those firms too much, given the strength of their profit lines. If markets continue to pick up, they could be in for greater revenue gains next financial year anyway, as heightened deal activity early this year starts to be reflected in the top-line numbers. 

"I wouldn't say this is material business growth," says one financial adviser to several of magic circle firms. "Revenue increases for A&O, Freshfields and Linklaters are fairly insignificant, but they've worked hard to drive a profit and PEP outcome. 

"I think they would love to have revenue growth, it's just that markets aren't playing to their areas of competitive advantage and strength. There are smart people running these firms; they realise they need to re-engineer the firm, while the top line is not growing. They'll squeeze costs a bit to drive margin, and there will, as ever, be equity changes." 

A partner at another magic circle firm adds: "Some firms are focused more on high profitability than revenue, while others are sacrificing profitability to get market share. Firms need to have a very clear view on what their strategy is going to be. Once you drop your prices it is difficult to get them back up."