In 1999 The Lawyer launched its first full-scale analysis of the largest firms by revenue in the UK, the top 100.
Back in 1999 the total value of the top 100 was around £5bn. Now that figure has increased by 186.5 per cent to £14.4bn.
But the top end of the market is not the only part of the profession that has changed out of all recognition. A few years ago we started taking more notice of some of the dynamic firms outside the top 100. This year that second 100 includes several that trounce their larger rivals when ranked by some of the key indicators of financial health, such as average profit per equity partner (PEP) and revenue per lawyer (RPL).
Take Stewarts Law. Last year the litigation shop’s equity partners took home on average £963,000, around £200,000 more than their opposite numbers at Clifford Chance.
Or Silverbeck Rymer, the 27-lawyer, £19.1m firm, where the PEP of £1.68m is second only to Slaughter and May’s.
Firms such as these have set a pace in the legal market that most rivals will find impossible to match. Silverbeck in particular, with just five partners, has a business model that points to the future shape of the UK legal market.
Another firm that is changing the shape of the top 100 is new entrant Optima Legal, a volume legal services provider, DLA Piper spin-out and limited company. Expect considerably more of these to appear in the list thanks to the Legal Services Act when The Lawyer publishes its 20-year analysis in 2019 (who knows, there may also be one or two fully listed companies in there too).
Earlier this year Optima partner Anthony Ruane claimed that the traditional partnership model may be “unsustainable”. As one poster on TheLawyer.com put it at the time: “Commodity legal services will have a huge effect on mainstream law firms in the coming years, where scale will be key.”
It is illustrative that in this year’s RPL table the firms in second and third positions, with Slaughters in first, are Silverbeck and Optima. To be fair, it should also be pointed out that all four magic circle firms make it into the top eight on RPL, while six-partner media boutique Schillings is sandwiched between Clifford Chance and Allen & Overy with an RPL of £493,000. So scale is proving to be key, but one should probably add ‘focus’ to the hit list of successful law firm strategies.
Some of the most successful firms last year have done little more than target a niche and do it well. If that niche then happens to go ballistic then that success can go off the scale - as in the case of pensions specialist Sacker & Partners, where the 53.3 per cent profit margin is second only to Slaughters’ among the top 100 firms (Silverbeck is not listed in the margin table as it is a second-100 firm and does not report profit figures).
Scale is certainly one of the most obvious aspects if you cast your eye over the past 10 years’ worth of our annuals - you only have to look at the change in total revenue to see that. But the degree to which the legal market has transformed since 1999 is also striking.
The average revenue per partner (RPP) has grown from £597,000 to £892,000 over the past 10 years, a 50 per cent rise, while on average partners at the top of the equity take home £564,000, up 75 per cent from £323,000 in 1999. And of course, this is in one of the toughest years on record.
Assuming the global recession eventually comes to an end, all bets are off on what the picture will look like in 2019.