Figures published earlier this year in The Lawyer Career Report 2006, which researched the recruitment market among the top 100 firms, suggested it was becoming increasingly difficult to make equity in a UK firm. Now the groundbreaking research in The Lawyer UK 100 Annual Report has confirmed this.

As the UK's top firms continue to grow in size, the business case for new equity partners decreases. There is probably no finer example of this than DLA Piper, where just 29 per cent of the partners are full equity, down from 31 per cent in 2004-05.

In the career report, DLA Piper co-chief executive Nigel Knowles argued that "all" of his firm's partners were equity, there were simply "several levels". "This allows us to manage the careers of our partners coming through the ranks as well as allowing us flexibility over the entry of laterals," he added.

Or, to put it another way, you are all equal, some are just more equal than others. To put it in context, DLA Piper's average profit per equity partner (PEP) in 2005-06 was £604,000. The average remuneration for a non-equity partner was £149,000. Some equality.

This disparity between the shrinking group of firms that operate full equity partnerships and those that employ ranks of salaried or fixed-share partners is one of the factors that makes The Lawyer's average earnings per partner (EPP) table so illuminating. Last year, when The Lawyer introduced this figure, the intention was to level the playing field. We wanted to address the common criticism levelled at the league tables that it was impossible to rank firms with completely different equity structures fairly.

Partners from the few remaining all-equity (or predominantly equity) partnerships, such as Bristows, CMS Cameron McKenna and Freshfields Bruckhaus Deringer, complained that it was unfair to compare their PEPs, business models and cultures with almost any other firm in the market, because those firms were effectively manipulating their figures. As one senior partner, with his tongue only partially in his cheek, puts it: "EPP gives a much more accurate view of who's good and who's not than PEP." Yes, he works at an all-equity firm.

As with last year, when The Lawyer introduced the EPP figure, we do not make a value judgement on a firm's approach to this issue. All-equity suits some firms, but not others. At its heart, this is a philosophical argument.

Still, it is hard not to have some sympathy with the all-equity point of view. The disparities between PEP and EPP simply shows the extent to which firms are, arguably, manipulating their profit-sharing systems, partnership structures and reported numbers in order to make themselves look better in these tables. If internal distinctions are made about a group of senior lawyers, if they are not remunerated as well as others in the firm and are not given the same level of responsibility, then why call them partners?

So, taking last year's introduction of the EPP figure as a platform, this year we have extended it to every firm in the top 100. For the first time The Lawyer has charted the entire top 100 to reveal the equity structures and remuneration systems at every firm.

This year, again for the first time, we can also plot exactly the extent of the gradual erosion of the all-equity partnership. Anecdotal evidence has long suggested that there are only a handful of all-equity partnerships left among the UK's largest firms. But equally, it was presumed by most commentators that the majority of firms, with a few notable exceptions, were still composed primarily of full equity partners with a small minority of fixed-share or salaried partners.

The truth is very different. Arguably an equity partnership that is 70 per cent of the total or less is the point at which a firm's culture begins to change. If three out of every 10 partners are effectively excluded from certain aspects relating to the running of a firm, then that may be sufficient to change the dynamic of that group substantially. And as The Lawyer can reveal, a massive 76 per cent of firms in the top 100 have partnerships that have 70 per cent or fewer full equity partners.

Does any of this matter? Certainly Dick Tyler, managing partner at Camerons, seems to think so. "I'm not sure what the benefit of all this is for firms' clients or their own people," he says. "If we'd called our most recent three years worth of partners 'non-equity', but still paid them the same amount, it would have added £37,000 to our PEP. None of our 'equity' partners would have been paid any more, but it would have made us look better in the league table."

But for John Goreing, finance director of 33 per cent-equity Fladgate Fielder, the issue simply comes down to business. "The difference is between being an owner of a business and being a senior lawyer capable of running transactions," he says. "The latter is what clients want, but not every senior lawyer is capable of, or wants the resonsibility that goes with, running a business. You could argue 'what does PEP matter?' What matters is a lawyer's earning capacity." The debate will run and run, but at least now the scale of it is clear.

• EPP V PEP (Firms 1 to 50, ranked by % of Equity Partners)
  (PDF 620KB)
• EPP V PEP (Firms 51 to 100, ranked by % of Equity Partners)
  (PDF 1,111KB)