Mid-sized firms take the City by storm as magic circle stumbles

Provisional figures for 2003-04 confirm that the magic circle suffered significant turnover and profit reductions last year, whereas many mid-market players rebounded.

Profits and turnover at Allen & Overy (A&O), Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters all fell. Freshfields registered the smallest profit drop with the average profit per equity partner falling by 3.5 per cent, from £700,000 to £675,000. The other three magic circle firms all reported double-digit drops, with Clifford Chance falling from £644,000 to £558,000, a drop of more than 13 per cent.

Turnovers at three of the four firms (Clifford Chance, Freshfields and Linklaters) also fell, while revenue at A&O was up just £2m on last year’s £647m.

Among the many startling statistics in this year’s provisional list, compiled by The Lawyer, is the performance of DLA. The national firm leapfrogged not only Herbert Smith (£243m turnover ), but also the bluebloods at Slaughter and May (£248m) with its turnover of £275m, to reach the number eight position in the table.

Another powerful performer, and also a national heavyweight, is Addleshaw Goddard. A year on and the Management Team of the Year Award winner at last month’s The Lawyer Awards has risen up the ranks, thanks to last year’s merger. Turnover now stands at £125.2m while profits broke through the £300,000 mark to reach £321,000.

Regional firms also did well, with Shoosmiths and Osborne Clarke turning in average profits of £226,000 (up from last year’s £136,000) and £303,000 (from £233,000) respectively.

The drop in revenues and average profits at the magic circle is reflected in the reduced market share of the big four. Last year they accounted for £3.14bn out of £7.76bn. This year that is down 1.5 per cent to £3.09bn out of £7.85bn. The profits fall is even more marked, with the four down 10 per cent against the average.

For table and analysis click here.