Acumen+giving+you+the+edge

Magic circle revenue growth falters in face of spiralling costs

25 February 2013 | By James Swift

  • Print
  • Comments (1)

Related Articles

Related Firms

The magic circle is struggling to keep revenues growing at a faster pace than costs, The Lawyer’s report into a cross section of firms’ LLP accounts show.

Out of the four magic circle firms, Clifford Chance and Linklaters posted turnover hikes in excess of cost-base rises. At Clifford Chance, turnover was up nearly by 7 per cent in 2011/12, from £1.219bn to £1.303bn, while costs at the firm rose by 4 per cent, from £837.1m to £870.2m. Similarly, Linklaters’ turnover was up by 6 per cent in 2011/12, while costs rose by 4 per cent.

Turnover at Allen & Overy was £1.18bn in 2011/12, up nearly 6 per cent from £1.12bn in 2010/11. This went hand-in-hand with a 6 per cent rise in operating costs in 2011/12. Nonetheless, profit for the financial year available for division among partners was £344.7m, up from £298m.

Freshfields Bruckhaus Deringer saw the biggest discrepancy between turnover and costs. Revenue was effectively flat in 2011/12 at £1.14bn, but between 2010/11 and 2011/12 staff costs rose by 10.2 per cent, from £480.4m to £529.6m. As a result profit was down by nearly 5 per cent, from £366.6m to £349m.

For more on what the LLP accounts say about the magic circle and a wider cross-section of firms, see The Lawyer’s feature here.

See all Related Jobs, Briefings & CPD/Events

Readers' comments (1)

  • Ashley Balls | 26-Feb-2013 2:52 am

    The alleged improved transparency is helpful but once again shows strong inclinations to cling to metrics that have less value. When non performing partners (in billing terms) are removed (aka retired) PEP figures hold up. A better metric would be profit per lawyer. The business model for most of the larger firms does not seem to encourage new innovative ways of working. The leverage ratios of partner to lawyer get ever larger making the likelihood of partnership for many an illusion. Yet the staff solicitors are the 'engine room' where profit is generated. Staff solicitors generate fees at rates of 3.5 - 6 times their salary for a diminished opportunity of partnership while partners rely on profits generated by others. If standard business management models were followed surely partner numbers would fall and more structured career paths be developed. Why do law firms with a turnover in the hundreds of millions require hundreds of partners when a public company with similar T/O can cope with a board of 7-12 directors?

    Unsuitable or offensive? Report this comment

Have your say

Mandatory Required Fields

  • Print
  • Comments (1)

Most popular

Most commented

Most emailed