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Friendly fire

Slaughter and May has been, and continues to be, very much a victim of its own success. Its historically very high profit margins have meant that virtually any type of expansion, either through office openings or mergers, has risked a decline in short term margins and thus has been avoided. However this has damaged the long term prospects of the firm as a business. Badly. Slaughter and May is now clearly a far weaker business overall, looking at size, breadth, total profits and profit margin, than the other members of the "magic circle". Indeed it has fallen so far behind that its sole claim to membership of that group is now its profit margin. Which of course then acts even more against organic expansion or mergers. And so the vicious circle continues until those profit margins will start falling too, as Slaughter and May is simply unable to compete with firms which are so much larger and genuinely global. This might not have mattered if the world had stayed as it was in the 1990s. But it has changed radically and that change continues to accelerate. The UK market is going to be a very small part of the global market in the future.

16-May-2012

2:57 pm