Slimmers’ world

The shrinking starts here: as we report today, total revenue for the UK top 30 was £10.84bn, down half a billion from last year’s figure of £11.36bn. So are the days of City growth over?

Certainly, global law firm partners are fond of saying that London will become less dominant in overall turnover, with future revenue rises sourced increasingly from outside the UK. Take Allen & Overy (A&O). Its non-UK practice has gradually increased to the point that this year it accounted for 60 per cent of total revenue – and that’s not even counting its Australia and Qatar launches, which will only start making money this financial year.

Yet over the past five years total magic circle ­London revenues have actually increased by 20 per cent, from £1.49bn to £1.79bn. In 2005 Linklaters and Clifford Chance dominated the London ­market, with £410m and £402m ­revenues ­respectively; A&O turned over £358m and ­Freshfields £320m.

Fast-forward five years and we see that Linklaters now grosses £514m in London, widening its lead over Clifford Chance at £455m, with A&O following on £420m and Freshfields on £399m. All four have broadly maintained their market shares, but ­Clifford Chance and A&O have dipped slightly and Linklaters and Freshfields have managed to increase their shares by a couple of percentage points.

Which brings us to this split within the magic ­circle – first noted by The Lawyer early this month and developed more fully this week on pages 4 and 5. The divide – with Freshfields and Linklaters on one side and Clifford Chance and A&O on the other – is one that is enthusiastically endorsed by ­Freshfields and ­Linklaters, as you might imagine.

Such a gap can only be divined in the details, but it also corresponds to historical market perceptions of the firms’ M&A practices; what’s more, Linklaters and Freshfields partners carp about Clifford Chance’s and A&O’s ’commoditised’ finance businesses, as if the latter two had no premium work whatsoever.

Still, Clifford Chance’s return to financial form (although on a much tighter equity partnership than its rivals’) was applauded by other magic circle partners this week. A profit rise by a competitor is always welcome – so long as it still stays bottom.