Total revenue at the UK's 50 largest commercial law firms climbed to £17.5bn in 2014-15 despite exchange rate fluctuations hampering the performance of many internationally facing firms.

The figure, which marks the fifth consecutive year of combined growth across the group, equates to a total fee income increase of 4% year-on-year, with the average revenue per firm standing at £350m.

Average profit per equity partner (PEP), meanwhile, stood at £627,000 for the year - a 7.9% rise on the previous financial year - and surpassing 2007-08's record high of £616,000.

Much of the overall increase in fee income was driven by consolidation. If growth derived from 2014-15's three major UK top 50 mergers - Wragge Lawrence Graham & Co, Blake Morgan and Charles Russell Speechlys - is taken out of the equation, average revenue growth across the group was negative, standing at -2.2%.

Twelve firms in the top 50 saw revenue decline over the year, including half of the top 10. In contrast, during 2013-14 only five firms in the entire UK top 50 saw fee income dip.

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Contributing to the challenges for firms was the strength of sterling against the euro and the dollar. Exchange rate fluctuations cancelled out the benefits many firms saw from more active deal markets, meaning that increases in activity levels did not lead to corresponding increases in fee income.top-50-in-numbers

Legal Week's rankings are based on actual revenue figures for all firms bar Herbert Smith Freehills, which declined to provide sterling numbers - however, many firms chose to also include constant currency calculations in their year-end statements, demonstrating improved financial performance when the impact of exchange rate fluctuations was disregarded.

Commenting on the issue, Freshfields Bruckhaus Deringer managing partner David Aitman said: "Exchange rates affect our results when they are reported in sterling. But currency adjusted results do not reveal so much about the underlying strength of business. Constant currency figures are much more revealing, and on those figures, we have seen real revenue growth."

Revenue per lawyer (RPL) across the group - which excludes claimant-focused insurance firms such as Slater & Gordon UK, Thompsons and Parabis - climbed to a new high of £341,000, up from £336,000 in the 2013-14 financial year. The measure, often viewed as a more reliable and consistent benchmark than PEP, is demonstrable evidence of law firms' efficiency drives in recent years, suggesting the low-cost bases many firms have set up are starting to pay off.

Aside from mergers, some of the greatest revenue growth was seen in the UK mid-market, where improved deal volumes and more limited international exposure saw several firms post revenue growth well into double digits. Of particular note are Stephenson Harwood, where fee income grew by 20% and Browne Jacobson, which entered the top 50 rankings for the first time with a 17.2% improvement.

A similar picture emerges with regards to PEP growth, with 15 firms seeing partner profits rise by 10% or more, including 10 which saw PEP climb by more than 20%.

Stephenson Harwood and Shoosmiths saw the largest increases at roughly 42%, with Pinsents on 32.8% against a 12% rise in revenue and Macfarlanes posting a 29.5% increase in PEP against a 14.2% rise in revenue. With Macfarlanes' PEP in 2014-15 standing at £1.553m, it now exceeds that of all firms bar Slaughter and May.

foley-richard-2-jpgPinsent Masons senior partner Richard Foley (pictured right), said of his firm's performance: "The partnership as a whole can take great satisfaction from a job well done over the past 12 months. It's been a year in which we saw the benefit of some of the investments the firm has made really start to flow through. It has really highlighted just how important it is for us to keep investing and growing the firm."

Notably, this year Legal Week included global revenue for firms operating under Swiss verein and similar structures for the first time, shifting DLA Piper to the top of the table ahead of longstanding UK leader Clifford Chance. For some of these firms no global PEP figure is available. Meanwhile, firms such as Dentons and King & Wood Mallesons, where strategy is largely governed from outside the UK, are also excluded.

Given their global spread and exposure to currency fluctuations, many of these firms found it more difficult to maintain revenue growth. Hogan Lovells deputy chief executive David Hudd said of the market: "It continues to be a very demanding market - you have to work hard to win and retain client relationships. London is a tough market and there are a lot of good firms competing for business."

DLA Piper co-chief executive Simon Levine added: "On apples and apples our revenue is slightly up, but that is on fewer people. We have been careful about the number of people we take on and whether we replace people when they leave because we are tight on headcount.

"While PEP is relevant, it is the pure profitability of the firm which matters and that has consistently gone up over a three to four year period. Not everyone has had that level of consistent growth."

Some firms with strong insurance and shipping practices also failed to get much traction over the year. Ince & Co, for example, saw the biggest percentage drop in revenue at 8.1% to £79.4m, with Hill Dickinson seeing turnover fall by 6.5%.

leydecker-sonya-webLooking ahead to the current year, Eversheds chief executive Bryan Hughes warned: "The UK market remains overlawyered, and therefore very crowded and very competitive - no change there, as this has been the state of the market for the last few years. While we have seen more transactional activity in the last 12 months than we have in recent years, the heady days of pre-recession will never return. Indeed, as we see the number of new entrants to the market increasing, competition, disruption and the need to continually change and adapt is only likely to increase."

Herbert Smith Freehills co chief executive Sonya Leydecker (pictured above) added: "Disruption in the legal market and uncertainty in the global economy look set to continue. Our aim is to anticipate and respond to the changing environment for the benefit of our clients. That is going to be a continuing theme."

Total revenue at the UK's 50 largest commercial law firms climbed to £17.5bn in 2014-15 despite exchange rate fluctuations hampering the performance of many internationally facing firms.

The figure, which marks the fifth consecutive year of combined growth across the group, equates to a total fee income increase of 4% year-on-year, with the average revenue per firm standing at £350m.

Average profit per equity partner (PEP), meanwhile, stood at £627,000 for the year - a 7.9% rise on the previous financial year - and surpassing 2007-08's record high of £616,000.

Much of the overall increase in fee income was driven by consolidation. If growth derived from 2014-15's three major UK top 50 mergers - Wragge Lawrence Graham & Co, Blake Morgan and Charles Russell Speechlys - is taken out of the equation, average revenue growth across the group was negative, standing at -2.2%.

Twelve firms in the top 50 saw revenue decline over the year, including half of the top 10. In contrast, during 2013-14 only five firms in the entire UK top 50 saw fee income dip.

|

Contributing to the challenges for firms was the strength of sterling against the euro and the dollar. Exchange rate fluctuations cancelled out the benefits many firms saw from more active deal markets, meaning that increases in activity levels did not lead to corresponding increases in fee income.top-50-in-numbers

Legal Week's rankings are based on actual revenue figures for all firms bar Herbert Smith Freehills, which declined to provide sterling numbers - however, many firms chose to also include constant currency calculations in their year-end statements, demonstrating improved financial performance when the impact of exchange rate fluctuations was disregarded.

Commenting on the issue, Freshfields Bruckhaus Deringer managing partner David Aitman said: "Exchange rates affect our results when they are reported in sterling. But currency adjusted results do not reveal so much about the underlying strength of business. Constant currency figures are much more revealing, and on those figures, we have seen real revenue growth."

Revenue per lawyer (RPL) across the group - which excludes claimant-focused insurance firms such as Slater & Gordon UK, Thompsons and Parabis - climbed to a new high of £341,000, up from £336,000 in the 2013-14 financial year. The measure, often viewed as a more reliable and consistent benchmark than PEP, is demonstrable evidence of law firms' efficiency drives in recent years, suggesting the low-cost bases many firms have set up are starting to pay off.

Aside from mergers, some of the greatest revenue growth was seen in the UK mid-market, where improved deal volumes and more limited international exposure saw several firms post revenue growth well into double digits. Of particular note are Stephenson Harwood, where fee income grew by 20% and Browne Jacobson, which entered the top 50 rankings for the first time with a 17.2% improvement.

A similar picture emerges with regards to PEP growth, with 15 firms seeing partner profits rise by 10% or more, including 10 which saw PEP climb by more than 20%.

Stephenson Harwood and Shoosmiths saw the largest increases at roughly 42%, with Pinsents on 32.8% against a 12% rise in revenue and Macfarlanes posting a 29.5% increase in PEP against a 14.2% rise in revenue. With Macfarlanes' PEP in 2014-15 standing at £1.553m, it now exceeds that of all firms bar Slaughter and May.

foley-richard-2-jpgPinsent Masons senior partner Richard Foley (pictured right), said of his firm's performance: "The partnership as a whole can take great satisfaction from a job well done over the past 12 months. It's been a year in which we saw the benefit of some of the investments the firm has made really start to flow through. It has really highlighted just how important it is for us to keep investing and growing the firm."

Notably, this year Legal Week included global revenue for firms operating under Swiss verein and similar structures for the first time, shifting DLA Piper to the top of the table ahead of longstanding UK leader Clifford Chance. For some of these firms no global PEP figure is available. Meanwhile, firms such as Dentons and King & Wood Mallesons, where strategy is largely governed from outside the UK, are also excluded.

Given their global spread and exposure to currency fluctuations, many of these firms found it more difficult to maintain revenue growth. Hogan Lovells deputy chief executive David Hudd said of the market: "It continues to be a very demanding market - you have to work hard to win and retain client relationships. London is a tough market and there are a lot of good firms competing for business."

DLA Piper co-chief executive Simon Levine added: "On apples and apples our revenue is slightly up, but that is on fewer people. We have been careful about the number of people we take on and whether we replace people when they leave because we are tight on headcount.

"While PEP is relevant, it is the pure profitability of the firm which matters and that has consistently gone up over a three to four year period. Not everyone has had that level of consistent growth."

Some firms with strong insurance and shipping practices also failed to get much traction over the year. Ince & Co, for example, saw the biggest percentage drop in revenue at 8.1% to £79.4m, with Hill Dickinson seeing turnover fall by 6.5%.

leydecker-sonya-webLooking ahead to the current year, Eversheds chief executive Bryan Hughes warned: "The UK market remains overlawyered, and therefore very crowded and very competitive - no change there, as this has been the state of the market for the last few years. While we have seen more transactional activity in the last 12 months than we have in recent years, the heady days of pre-recession will never return. Indeed, as we see the number of new entrants to the market increasing, competition, disruption and the need to continually change and adapt is only likely to increase."

Herbert Smith Freehills co chief executive Sonya Leydecker (pictured above) added: "Disruption in the legal market and uncertainty in the global economy look set to continue. Our aim is to anticipate and respond to the changing environment for the benefit of our clients. That is going to be a continuing theme."