UK top 30: revenues shrink by half a billion as PEP rebounds
Two-thirds of top 30 see increase in PEP; total revenue down 4.5 per cent; Clifford Chance regains top spot
The total revenue generated by the UK’s top 30 law firms fell by half a billion pounds last year.
In 2008-09 the total revenue of the UK top 30 stood at £11.36bn. Last year that fell by 4.5 per cent to £10.84bn.
The performance of the UK’s big four firms - analysed in detail on pages 4 and 5 - broadly reflects that of the top 30 as a whole.
In 2008-09 the revenue generated by the four largest firms - Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters - totalled £4.94bn. In the past financial year that fell by 7.5 per cent to £4.57bn.
Total net profit at the same firms tells a different story, however. The profit generated by the big four in 2008-09, £1.82bn, rose by 3 per cent to £1.88bn last year.
Of this, it was Clifford Chance’s performance that stands out. It was the only one of the quartet to post a rise in net profit, adding £80m to the bottom line.
Figures for The Lawyer UK 200 Annual Report 2010 are still being finalised, but in light of recent events it will come as no surprise that one of the biggest fallers by revenue among this year’s top 200 so far was Halliwells, which posted a 14 per cent decline in turnover, from £77.8m to £67m.
Among the 30 largest firms some of the most significant drops in revenue were posted by the largest, transactionally dominated practices. Simmons & Simmons and Slaughter and May saw revenue drops of 14 and 13 per cent respectively. Hard on their heels comes Freshfields and CMS Cameron McKenna, both of which registered 11 per cent decreases. Camerons was also jointly the biggest faller on average profit per equity partner (PEP) among the top 30, posting an 18 per cent drop in PEP, from £554,000 to £453,000.
Slaughters, one of the few in the table for which figures have been estimated (Lovells and DLA Piper, which report this week, are two others), is thought to have seen a drop in PEP from £2.25m to £1.84m.
Further down the table, as this year’s reporting season nears its peak, an intriguing picture of mixed fortunes emerges for the UK’s leading firms.
While total fee income was down, in contrast PEP grew at well over half of the UK’s 30 largest firms last year. The result underlines the return to form of much of the domestic legal market.
This year’s financial reporting season has been characterised partly by a succession of firms, several coming from a relatively low base in 2008-09, reporting hefty and largely unexpected increases in PEP.
So despite the 4.5 per cent drop in total revenue, these figures confirm that the widespread cost-cutting undertaken by most of the leading firms has paid dividends.
Firms outside the top 30 currently top the list, with Shoosmiths, LG and Travers Smith posting rises of 70, 64 and 53 per cent respectively. Among the top 30, however, the PEP rises have been slightly less dramatic.
Travers’ performance contrasts with its silver circle rival SJ Berwin, which has endured a torrid time in recent years. Last year it posted a 7 per cent fall in revenue and a 9 per cent rise in PEP, somewhat less spectacular than Travers’ figure.
Elsewhere, Pinsent Masons and Hammonds top the high PEP risers table with increases of 32 per cent.
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Readers' comments (21)
Scep Tick | 12-Jul-2010 9:11 am
So, turnover goes down but PEP goes up? In other words all those waves of redundancy led by the partners who could not get the business in was to the benefit of those very same, self-evidently incompetent partners.
One upon a time law was a profession. Now it is the preserve of a venal, disgraceful, pathetic oligarchy who have scrambled up the stepladder before kicking it away. I wonder how many good lawyers will walk away from the law as a direct result. In 20 years' time we might be seeing a crisis of intelligence. Unfortunately, the current partners will not care, as they will have made their stash.
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Anonymous | 12-Jul-2010 10:01 am
Merger with Proskauer can't come quickly enough for SJ Berwin.
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Anonymous | 12-Jul-2010 10:30 am
@ Scep Tick Tough times to deal with personally for many - but since when has it been an unacceptable objective for any business to seek to improve profits & shareholder return? And, no, I'm not a partner.
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Anonymous | 12-Jul-2010 10:35 am
One upon a time law was a profession. Now it is the preserve of a venal, disgraceful, pathetic oligarchy who have scrambled up the stepladder before kicking it away
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Agreed, City law is now deeply unpleasant and solely money driven (as evidenced by tables like the one above).
Many associates have lost their jobs, and in many cases their homes and even careers, to protect the salaries of those taking home ten times as much.
In an industry like car manufacturing, where profit margins are 5% or less in even good times, redundancies in bad times are a matter of survival and necessity.
In City law firms, redundancies in bad times are a matter of GREED. The manner of many of those redundancies has been even more despicable, with good lawyers being pushed out in the most unpleasant manner through untrue appraisals, bullying and all manner of other 'stealth' techniques.
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Anonymous | 12-Jul-2010 11:04 am
How did you estimate the figures for Slaughters? If yours are indeed accurate that is slightly shocking news.
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What's gone wrong | 12-Jul-2010 11:36 am
Who are these guys making that much money? Most of the firms are so downsized it's pygmies on the shoulders of pygmies.
In the scenarios of the Texas Chainsaw Massacre meets the Black Hole of Calcutta (can you say that?) do those chaps have any strategy other than "fill my boots?"
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Howard | 12-Jul-2010 4:16 pm
Re-Anonymous | 12-Jul-2010 10:35 am Quite agree. What does this show us? Since when has turnover been a sign of quality or client service? Some of the best firms I have had the pleasure of dealing with in my 30 or so years in business - and they are top notch - wouldn't even feature in this list because they don't have this primitive obsession with size. This legal journal admittedly does report on variables beyond revenue and profitability but the mindset within the City firms is too entrenched.
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Joe | 12-Jul-2010 4:18 pm
I'm surprised to see a 13pc drop at Slaughters - biggest dip in the top 10. Not enough banks going under to keep them busy any more?
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HGRd | 12-Jul-2010 4:18 pm
Amusing how far the disappearance of deference has travelled into the legal profession. One only has to read the above to see how lower calibre mediocrities routinely try to pwn their betters.
Nonetheless, partners, you are rumbled!
hgr@hotmale.com
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Anonymous | 12-Jul-2010 4:19 pm
If my firm reports PEP down, the legal press claim we're struggling. But I suspect that our PEP will be down, because we've tried to hang onto our staff. It's the right thing to do, but not the way to absolutely maximise profits to the hilt.
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Tim Russell | 12-Jul-2010 4:32 pm
Here is a simple if rhetorical question. How many partners in the one of the bigger firms would truly say that they enjoy their jobs and would recommend the law as a career , to the next generation . It might be very different if there was not the same " peer" pressure , amongst the top firms , to constantly increase profitability at the expense of a fullfilling life at and away from work. And as the gap between London and the provinces grows wider the profession becomes more divided. I guess the cardiologists and ex wives ( with apologies to the many successful women partners but you know what i mean ) will be happy.
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Anonymous | 12-Jul-2010 4:39 pm
The City model works very well for the few, but what about the salaried partner who sees the prospect of equity receding into the distance, or how about the senior associate in the same position? All too often these guys are not being fairly rewarded, on the contrary they are working increasingly hard and under growing pressure.
For these guys therefore the City model is broken, they'd be much better speaking to firms that offer performance related pay, such as Keystone Law or Cramer Pelmont. Not only would they increase their revenues and job security, but they would also get their lives back!
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City Gent | 12-Jul-2010 5:01 pm
Perhaps the reason that Slaughters' PEP is down so much is that they behaved like gentlemen and retained staff even though they weren't fully employed, unlike the money-grubbing partners in many of the other firms mentioned, who chose to sacrifice loyal staff to line their own greasy pockets.
These are not professional people in any real sense of the word. They are just hucksters who happen to practise law as a lucrative trade, and they would be just as happy managing a brothel if the money was right.
"What shall it profit a man if he gain the whole world but suffer the loss of his own soul?"
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amused | 13-Jul-2010 9:41 am
so called gentlemen rarely are, City Gent. Even the most cursory knowledge of the interior workings of "Slaughters" would rebut your assertions.
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Bleeding Heart | 13-Jul-2010 3:52 pm
As some have pointed out already here, PEP isn't the be all and end all when it comes to judging a firm's performance, especially when it can go up and down as much as we've seen over the last few years.
Some of the firms that I would say have been most stable and best run are down this year in pure profit terms. But it doesn't suddenly make them bad firms. Nor does a 28pc rise make Eversheds THE place to work.
You'd think people so well versed in the ways of the City would be able to see through these numbers. But then, maybe the last few years has taught us that they may not be the Masters of the Universe after all...
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Britomart | 13-Jul-2010 3:58 pm
Everyone knows PEP is an artificial concept, but no more artificial than any other yardstick businesses use. You only have to talk to MC lawyers for half an hour to see that PEP is in their DNA, and they're hardly gonna change when it's all about money in their own pockets
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Anonymous | 13-Jul-2010 4:30 pm
A column should be added to the main table showing how many redundancies have been made in the last two years. Then we can clearly see the firms whose PEP rises are due to redundancies rather than revenue increases or cost-cutting.
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Anonymous | 13-Jul-2010 6:38 pm
Problem is Anonymous 4.30pm there is a big difference between announced redundancies and the hundreds who have been 'managed out' on the quiet.
Maybe when the LLP accounts are actually published The Lawyer should make a comparison between the number of fee earners at these firms in 2008, 2009 and 2010 and try and find out the true scale of departures, I suspect many of the so-called announced redundancy numbers will bear no comparisons to the numbers pushed out.
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Ashley Balls | 14-Jul-2010 6:55 am
Here we go again. Revenue/fees down (in response to client demand) and cost cutting results. When that process is complete what then? Leaner, meaner law firms - probably not; more likely fewer partners, a longer run to partnership (if ever for many) squeezed margins, outsourcing, insourcing, whilst stuck with ever rising property and wage costs. In similar circumstances new business models would start to emerge. What is the likelihood in legal services? To date the only change has seen the advent of the virtual firm which is only a stripped down 'old' law firm. Surely there are some new ideas out there.
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Scep Tick | 14-Jul-2010 2:16 pm
"@ Scep Tick Tough times to deal with personally for many - but since when has it been an unacceptable objective for any business to seek to improve profits & shareholder return? And, no, I'm not a partner."
Any idiot can make a short-term gain by cutting costs. Doubtless any law firm could make a whopping great PEP by selling city centre offices and moving to Benbecula. It does not make it good management; it does not mean that it is in the owners' long-term interests. Unfortunately law firm owners do not HAVE long-term interests, it seems...
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