Clifford Chance partners are bracing themselves for a 30 per cent drop in profitability this financial year, with plateau partners expected to pocket around £900,000 each. Last year the top of lockstep payment was £1.32m.
The last time plateau partners earned less than £1m was in the 2005-06 financial year, when the equity spread ran from £370,000 to £920,000 and average profit per equity partner (PEP) stood at £810,000.
As the majority of the firm’s equity partners are at or near the top of the nine-year lockstep, average PEP for the current year is likely to be in the region of £800,000.
Global managing partner ;David ;Childs refused to be drawn on exact figures, but said: “We give partners guidance from time to time and have said to them they should assume that PEP would be significantly down on last year.”
Partners also recently contributed £60m between them to the firm’s capital (TheLawyer.com, 9 January).
Childs explained that the firm had to make the cash call, which equates
to ;an ;average ;of £150,000 ;per equity partner, because turnover had risen so much in the past few years that ;the firm’s capital level looked inadequate.
Partners gave ;management ;the power to increase capital in tranches, but the plan was changed in October 2008 as the financial crisis ;took hold.
Childs said: “At that point we ;did ;a U-turn. ;We said if the banks were willing to give us the money now, then why not take the capital in one tranche? If it hadn’t been for the chaos in the markets ;in October, then ;we wouldn’t have done ;it ;in one go.”
The move will ;have ;increased members’ capital from £127m at the end of the 2007-08 financial year to around £190m.
Despite this, the firm has not escaped the effects of market conditions and is now planning to cut jobs in a number of jurisdictions.
The London office will bear the brunt of the cuts, with up to 80 of its 880 non-partner fee-earners facing redundancy (TheLawyer.com, 8 January). Trainees will not be affected.
The London cuts come after the firm reduced headcounts in Moscow and New York through limited redundancy programmes and performance appraisals.
Clifford Chance’s German offices are also understood to be making headcount reductions ;through performance reviews.
For more on this topic, see this week’s leader.