Squaring up in the Magic Circle

This year’s reporting season looks like being a doozie. What with Lovells’ final ever appearance as a UK firm, LG’s comical 63 per cent PEP increase and the now unveiled reality of Halliwells’ plummeting (and ultimately terminal) turnover, there’s no shortage of fun.

But the really big story looks like being at the top of the tree. On the face of things Allen & Overy and Clifford Chance have made up much of the lost ground on rivals Freshfields and Linklaters.

A&O’s PEP is up 10 per cent (see story) while CC’s is up a whopping 25 per cent (see story).  Indeed, Clifford Chance has now stolen back its crown as the UK’s largest firm by revenue.

But, frankly, who cares about revenue? Dig a little a deeper and things look slightly different.

CC’s PEP is still 20 per cent down on its 2007-08 high of £1.17m while A&O’s, at £1.1m, lags behind Linklaters’ £1.21m (see story) and Freshfields’ mighty £1.41m (see story).

But, frankly, who cares about PEP?  Profit margin is really where it’s at – Freshfields’ 52 per cent, Linklaters’ 42 per cent, A&O’s 39 per cent and CC’s 29 per cent tells its own story.

The results say less about a return to form in the UK legal market and much more about the rapidly developing two-tier nature of the magic circle.