North West test
18 October 2004
Two years ago, Manchester celebrated a hugely successful Commonwealth Games, and law firms celebrated. Now it is Liverpool’s turn to celebrate a major event coming home, and this year’s figures are already encouraging for the big players in the run-up to the city playing host to the European Capital of Culture in 2008.
Indeed, the North West region overall has had a pretty good year. Real estate and insurance have, as ever, been strong areas. The region benefits from having particularly low costs per lawyer (CPL), with five of the largest firms in the bottom 25 nationally when it comes to cost, according to The Lawyer UK 100 Annual Report. Most firms saw a rise in revenue last year and are comfortable in a harsh economic climate.
Some firms have seen more significant rises, most notably Cobbetts. In 2001 the firm languished below the rest of the large Manchester firms, with a turnover just above £15m. This year, three mergers later, it has rocketed to the top of the region and boasts a turnover of £41.8m, a 266 per cent increase in four years.
There is no doubt that the rise is due to managing partner Michael Shaw’s aggressive expansion policy. The mergers began when Cobbetts first found a Leeds foothold with the Read Hind Stewart merger in May 2002. Next came the addition of boutique Fox Brooks Marshall in November 2003, swiftly followed by the firm’s move into Birmingham when it joined forces with Lee Crowder.
The expansion has continued in the first quarter of this financial year, with Cobbetts adding Leeds boutiques Wilbraham & Co and Walker Charlesworth & Foster to the ever-growing firm. The best that can be said about profit per partner at Cobbetts, however, is that it has remained more or less static throughout, going from £201,000 in 2001 to £202,000 at the end of the last financial year. The net effect is that the profit margin has dropped. Cobbetts is also 97th in The Lawyer 100 revenue per partner (RPP) table, suggesting that it was a low leverage ratio.
Shaw, though, says the firm takes pride in the fact that it has funded its tremendous growth out of its own resources. “We’re confident that our growth in profit will now begin to flow through,” he claims. “It’s about taking a view of the national stage and our place in that.”
Just behind Cobbetts in terms of turnover comes a clutch of North West firms: Weightmans, Halliwells, Hill Dickinson, Berrymans Lace Mawer, Pannone & Partners and DWF are all hovering between £30m and £40m. Profitability varies widely, though, from Weightmans’ rock-bottom 10 per cent margin to Pannones’ 34 per cent.
Liverpool-based Weightmans has been through a bad few years thanks to consolidation in the insurance market, but is now steadily trudging along the road to success. Weightmans’ turnover was incorrectly stated as £41m in The Lawyer UK 100 Annual Report. But despite a 9 per cent turnover increase to £30.5m, Weightmans has one of the country’s lowest profit margins at 10 per cent. Only Bolton-based Keoghs is lower at 7 per cent. CPL at Weightmans is high for the North West at £151,000.
But the mood at Weightmans appears to be positive. The London office, gained from the 2002 merger with Vizard Oldham, is doing well and, in its home town of Liverpool, Weightmans hopes to profit from the Capital of Culture.
Managing partner Patrick Gaul says: “Profits per partner are on their way back. It’s a very busy firm now and in nearly all of our areas we are doing well.”
Berrymans Lace Mawer is another insurance-focused firm that has gone through a rough period but is now striking back. Profit per equity partner (PEP) at £165,000 was at a four-year high after dropping from £157,000 to £130,000 in 2001. CPL was the region’s second lowest at just £113,000, although Berrymans strengthened its operations across the Pennines when it took on Stockton-on-Tees’ Jacksons in November 2003.
In July this year, Halliwell Landau became the first North West firm to convert to limited-liability partnership (LLP) status, losing the ‘Landau’ half of its name in the process. The rebranded Halliwells celebrated a good year with revenue and profit both rising. PEP was particularly strong at £360,000, the 25th highest in the top 100.
One place below Halliwells in the top 100, Hill Dickinson is capitalising on Liverpool’s success by sponsoring the City of Culture. Insurance is less of a priority than it used to be, but remains important for the litigation-driven firm.
Hill Dickinson’s profit margin and CPL are a respectable 24 per cent and £127,000 respectively and, unusually for the region, the firm has an office in Chester as well as bases in Liverpool, Manchester and London.
The only North West firm with a female managing partner, in the shape of Joy Kingsley, and a pure lockstep is Pannone & Partners, which is steadily climbing the league table by concentrating on its strengths.
The lateral hires of Philip Treanor and Simon Wallwork from Addleshaw Goddard and Wacks Caller respectively in corporate and commercial in the financial year 2002-03 came good this year. Kingsley says the department has grown significantly. Despite this, personal injury (PI) remains Pannones’ bread and butter, and as revealed in The Lawyer (20 September), three-quarters of the firm’s PI work comes from the integrated volume business.
One spot below Pannones at 64 in the top 100, DWF has the second-highest PEP in the North West at £265,000 and saw a 12 per cent growth in turnover between 2003 and 2004. The firm has one of the tightest equities nationally, with just 19 equity partners in the total partnership of 56. This pushes revenue per equity partner above £1.5m, although with 201 lawyers, revenue per lawyer (RPL) is a low £146,000.
The brace of firms at the bottom of the top 100 table, at 96 and 97 respectively, is Brabners Chaffe Street and Keoghs. The two have very similar turnovers but radically different business models. While CPL at Liverpool-based Brabners is just £103,000, the lowest in the region, Keoghs’ is the second highest at £163,000. Conversely, Brabners’ profit margin is a high 37 per cent, making it the twelfth most profitable firm in the country, while Keoghs is the least profitable of the top 100 at 7 per cent.
Keoghs chief executive Paul Smith says: “We have been investing in technology and we have been investing in people. I think we’re starting to see things grow already.”
As the larger North West firms continue to make moves on their southern counterparts, they will need to maintain the cost advantages of working in Manchester and Liverpool. For the next few years at least, real estate and insurance will remain strong for the region, but, as Pannones proved this year, corporate and commercial are not areas to be ignored. Cobbetts’ aggressive growth might not be for everyone, but the firm has certainly led the way in showing that regional firms in the North West can be a viable alternative to the larger nationals.