The average profit per equity partner (PEP) of the UK’s top 30 law firms has grown by 92.7 per cent to £764,900 since the turn of the century.
The ;total ;revenue amassed by the top 30 has risen by 145 per cent, from £4.3bn in 2000 to £10.5bn during the last financial year. Despite the huge growth of the sector, the pecking order at the top end has changed little, with just Ashurst breaking into the top 10 during the eight-year period.
Freshfields Bruckhaus Deringer chief executive Ted Burke said: “It takes years and years to build up a reputation with clients and with potential recruits. Those are the two key ingredients for success. Because it takes so long to do that, the relative success of law firms doesn’t change dramatically from year to year.”
Freshfields has been one of the strongest performers during the period, with PEP rising by 120 per cent and revenue by 210 per cent. In 2000 Freshfields was the least profitable magic circle firm with a PEP of just £675,000, but driven by its recent restructuring it has now emerged as the most profitable ;with ;a ;PEP of £1.48m.
Allen & Overy (A&O), by contrast, entered the new millennium as the magic circle’s most profitable firm with a PEP of £744,000, but the firm has since become its least profitable, with PEP rising by just 50.5 per cent to £1.12m.
Linklaters, where PEP has grown by 103 per cent, and ;Freshfields ;have powered away from A&O and Clifford Chance, with the latter’s PEP growing by 70.8 per cent since 2003, when Linklaters underwent its own restructuring. While A&O, Freshfields and Linklaters have piled on the revenues (all have grown by more than 200 per cent, while Clifford Chance trails with a growth of 127 per cent), in the profitability stakes all are left in the shade by Slaughter and May, where PEP hit £2.25m this year, according to sources.
Slaughters is the City’s most profitable law firm, but refuses to comment on its finances. It is the only firm in The Lawyer’s UK 200 that does not disclose its financial results. Nevertheless, its PEP has shot up by 134 per cent since 2000, and this year’s 15 per cent growth in revenue pushes it back above Lovells in the top 10 as ranked by revenues.
While the magic circle remains an elite club, the UK top 10 is equally hard to break into, with firms such as CMS Cameron McKenna, Simmons & Simmons and SJ Berwin still knocking on the door.
Simmons was languishing at the turn of the decade with a PEP of just £254,000, but the firm has witnessed a renaissance that has resulted in that figure rocketing by 155 per cent. Managing partner Mark Dawkins said: “For the past four years or so we’ve not been driven by the desire to grow size – we’ve been driven by the desire to grow profit, which in time should give us the platform to grow size.”
Below this group the landscape has changed massively, with Andersen Legal, ;Denton ;Hall, Masons, Pinsent Curtis, Richards Butler and Wilde Sapte no longer existing in quite the same form as they did back in 2000.