Magic circle leads the way in record year for UK firms

UK law firms have surpassed all records, with unprecedented growth in both turnover and profit, The Lawyer can reveal.

Average turnover growth for the top 50 firms was 13 per cent up on the previous year, while growth in average profit per equity partner (PEP) averaged 19 per cent.

Average PEP in the top 50 has now broken £500,000 for the first time, at £506,000, compared with last year’s PEP of £428,500.

The UK’s elite firms posted among the most impressive percentage rises, with the big four managing an average rise in turnover of more than 13 per cent and a jump in PEP of over 22 per cent.

Linklaters‘ PEP figure of £1.06m crowns an impressive three-year period of growth. The firm’s performance was unmatched by any of its magic circle rivals. However, Allen & Overy (A&O), Clifford Chance, and Freshfields Bruckhaus Deringer all increased both total revenues and average profits significantly.

Linklaters’ PEP figure, which rose by 26 per cent from last year’s £843,000, has also piled the pressure on Slaughter and May‘s traditional position as the UK’s most profitable firm. Slaughters posted a PEP of £1.12m for 2005-06, a rise of 6.5 per cent.

At the other end of this year’s top 50 it was Trowers & Hamlins that posted the largest increase in revenue of any firm. Trowers saw total turnover rise from £44.2m to £56.4m, an increase of 28 per cent.

But that success was considerably outstripped by its bottom-line performance. Average profit grew by 41 per cent last year, mushrooming from £335,000 to £472,000.

Senior partner Jonathan Adlington said revenue from the firm’s Middle East practice had increased by 66 per cent, but its real estate team, which includes social housing, and the corporate practice had also performed well, with revenues up by 32 per cent and 20 per cent respectively. “If the core business does well and you have one or two major projects, then a firm of our size tends to do well,” said Adlington.

Halliwells was also a strong performer, with revenue up by 25 per cent and PEP by 24 per cent.

Travers Smith posted strong results for both revenue and profit, with increases of 25 per cent and 23 per cent respectively. PEP at Travers broke through £700,000, consolidating the firm’s position in The Lawyer’s silver circle of highly profitable, highly focused domestic practices.

Ashurst, Macfarlanes and SJ Berwin also featured last year in the silver circle. Of the group of four, only SJ Berwin failed to break through £700,000. It posted a healthy 17 per cent increase in PEP to £670,000, although sources close to the firm say that the published provisional figure of £670,000 is highly conservative.

The provisional top 50 table has thrown the performances of mid-market firms into relief. Olswang was among the best performers, with a 21 per cent rise in revenue to £77.7m and a 31 per cent increase in PEP to £531,000. The firm’s chief executive Jonathan Goldstein said earlier this year (The Lawyer, 15 May) that £500,000 was “becoming the benchmark” by which the leading mid-market firms should be judged.

The Lawyer’s figures reveal, however, that few of Olswang’s competitors achieved that level, suggesting that the benchmark remains aspirational for the majority of the mid-market.

PEP at Osborne Clarke rose by 18 per cent to £425,000; at Bird & Bird it increased by 20 per cent to £413,000; while Taylor Wessing‘s global PEP, which includes its German operations, rose by 14 per cent to £393,000. PEP at the UK-only part of the business stood at £517,000.

Top 20 firms 2006 (ranked by pep)
Rank Firm PEP 2006 (£K)
1 Slaughter and May 1,120
2 Linklaters 1,062
3 Macfarlanes 945
4 Herbert Smith 839
5 Freshfields Bruckhaus Deringer 830
6 Clifford Chance 810
7 Allen & Overy 788
8 Travers Smith 705
9 Ashurst 701
10 SJ Berwin 670
11 Berwin Leighton Paisner 630
12 DLA Piper Rudnick Gray Cary 604
13 Lovells 572
14 Olswang 531
15 Irwin Mitchell 525
16 Halliwells 507
=17 Clyde & Co 500
=17 Richards Butler 500
19 Field Fisher Waterhouse 485
20 CMS Cameron McKenna 476
Top 20 firms 2006 (ranked by turnover)
Rank Firm Turnover 2006 (£m)
1 Clifford Chance 1,030
2 Linklaters 935
3 Freshfields Bruckhaus Deringer Freshfields Bruckhaus Deringer
4 Allen & Overy 736
5 Lovells 396
6 DLA Piper Rudnick Gray Cary DLA Piper Rudnick Gray Cary
7 Slaughter and May 321
8 Eversheds 320
9 Herbert Smith 296
10 Simmons & Simmons 227
11 Ashurst 214
12 Norton Rose 210
13 CMS Cameron McKenna 181.3
14 Pinsent Masons 172
15 Addleshaw Goddard 161.2
16 SJ Berwin 150.7
17 Denton Wilde Sapte 147.5
18 Berwin Leighton Paisner 145
19 Taylor Wessing 142.45
20 Hammonds 132.6