Running a London office is proving to be a mixed blessing for European firms, as newly released LLP accounts reveal.
A third of Europe’s top 30 firms operate their London offices as LLPs. Italian firm Chiomenti Studio Legale converted to LLP status in late September, while three firms – Egorov Puginsky Afanasiev & Partners, Wikborg Rein and NTCM – have obtained exemptions due to the small size of their London offices.
Salans’ and German firm Noerr’s accounts represent the entirety of their operations, as both run the whole firm as an LLP.
That leaves four firms – Spain’s Garrigues and Cuatrecasas Gonçalves Pereira, France’s Gide Loyrette Nouel and Italy’s Bonelli Erede Pappalardo – to reveal the state of their UK operations for 2010.
Both Gide and Cuatrecasas made operating losses in London last year. For Gide the £1.8m deficit followed a £3.3m loss in 2009, with turnover declining from £9m in 2009 to £7.6m last year.
London revenue amounted to only a small proportion of Gide’s overall e210m (£190m) turnover for 2010.
Staff costs at Gide in London fell by £1.4m between 2009 and 2010 as the firm shed nine lawyers, two paralegals and four support staff, the accounts show.
Much of the £1.8m loss incurred in 2010 was accounted for by a £1.4m “onerous lease” provision. Gide also had to put £904,000 towards this in 2009. The firm leases three floors at 125 Old Broad Street and brought in income of £524,000 from sub-letting space last year, but was still required to make the provision.
London managing partner Colin Mercer said the onerous lease did not have an impact on the health of the office but did “distort” the accounts.
“Things are very much going in the right direction,” Mercer said, pointing to the reduction in the operating loss of London between 2009 and 2010.
The two years of losses followed two extremely profitable years for Gide in London. In 2008, its first set of LLP accounts reported turnover of £18.3m, with profits of £5.8m – a margin of 32 per cent.
Gide has committed to supporting London. Senior partner Pierre Raoul-Duval said opening in the City was “one of the most strategic moves” the firm had ever made, adding: “It will remain strategic forever – we think we have a great future in London.”
Meanwhile, Cuatrecasas reported London turnover of £84,837 in 2009, which rose substantially to £503,692 in 2010. A £734,193 loss in 2009 was reduced to £242,729 last year.
Staff costs for the office fell dramatically between 2009 and 2010, according to the accounts. Although the number of Cuatrecasas employees in London dropped from five to four, costs reduced from £950,000 to just £268,000, mainly as ’members’ costs’ were cut from £706,000 to £40,500.
Cuatrecasas declined to comment on the LLP accounts.
The picture was decidedly rosier at both Bonelli and Garrigues. The Italian firm reported London turnover of £4.5m in 2010 with a profit of £2.1m, with both figures up slightly on the previous year.
Bonelli’s accounts showed that in January 2011 the parent firm agreed to provide the LLP with a £2m drawdown facility, which was used in April to repay a £565,000 bank loan.
The financial year for Garrigues’ London office ends in August. For the 2009-10 year the firm reported turnover of £1.6m, with a profit of £389,000. Both figures represented a drop from the previous year.