2013/14 financials: a decade in figures at the magic circle

Clifford Chance might dominate the magic circle at the latest year-end but how has the firm performed over the last 10 years? Look inside the magic circle decade for a clearer perspective.

For the fifth consecutive year Clifford Chance has dominated the magic circle in terms of revenue with turnover of £1.359bn, 7.6 per cent ahead of its nearest rival Linklaters and its revenue of £1.255bn.

Combined, the magic circle produced revenues of £5.076bn at the 2013/14 year end, marking a return to growth across the board.

Clifford Chance showed the biggest jump, up 7 per cent from £1.271bn to £1.359bn (1 July 2014) and Linklaters came in second with a revenue increase of 5 per cent from £1.195bn to £1.255bn.

Allen & Overy (A&O) pushed up turnover by 2 per cent from £1.210bn to £1.230bn (2 July 2014), while Freshfields Bruckhaus Deringer saw the smallest revenue jump, up 0.9 per cent £1.221bn to £1.232bn.

Clifford Chance also eclipses its magic circle rivals in terms of net profit growth, up 14 per cent to £459m, and average profit per equity partner (PEP), which increased by 16 per cent from £1m to £1.14m. That said Freshfields’ equity partners were the biggest earners in the magic circle in 2013/14, taking home a bumper average pay packet of £1.48m.

A snapshot picture of the last financial year, a year in which firms are still building their way out of recession, provides a narrow insight into which of the top four are really performing.

For a deeper understanding, let’s take a look at the 10-year picture.

In 2004/05 combined revenues at the magic circle stood at £3.165bn. That means market value has swollen by £1.911bn.

It may surprise many that it is A&O that has had the most successful decade in growth terms, pushing up revenues by £564m from £666m to £1.230bn – the equivalent of 84.7 per cent (see table 1).

The remaining three have all experienced similar growth levels. Freshfields increased from £780m to £1.232bn – £452m (see table 3), Linklaters from £805m to £1.255bn – £450m (see table 4) and Clifford Chance from £914m to £1.359bn – £445m (see table 2).

Now take a look at net profit. A decade ago combined net profit across the magic circle firms was at £1.112bn. Fast forward to 2013/14 and the figure has rocketed by a massive 91.2 per cent to £2.126bn.

Again A&O tops the growth table surging ahead of the pack with 142 per cent growth over the 10 years from £219.8m to £532.1m.

Lagging behind the pack is Freshfields, where net profit over the same period has increased by 63.2 per cent, up £223.8m from £354.2m to £578m. Perhaps it is telling that it was Freshfields that suffered the biggest revenue bump in the road after the economic collapse of 2008. At the 2009/10 year end the firm saw revenues tumble by 11.3 per cent from £1.287bn to £1.141.

Over at Clifford Chance, meanwhile, it was the partners who felt the pinch hardest when, in 2008/09 PEP nosedived by 37.4 per cent to £733,000. Even today as the largest magic circle firm Clifford Chance has not been able to achieve the £1.17m PEP figure it published in 2007/08.

It isn’t alone in being unable to reach the dizzying heights of 2007/08. Freshfields outperformed the market in terms of PEP that year at £1.484m, today it is still £4,000 shy of the mark at £1.480m.

Linklaters, meanwhile, is £4,900 behind its 2007/08 high of  £1.44m with 2013/14 PEP of £1.391m.

Again, A&O beats the rest with a £2,000 margin between 2007/08 PEP of £1.122m and 2013/14 PEP of £1.12m.

Taking a broader scope of the magic circle and looking at the last decade in numbers reveals that while Clifford Chance is in a dominating position it is A&O that has been the most successful in managing the money.

Table 1, Allen & Overy: a decade in numbers

 
  Turnover (£bn) % change Profit (£m) % change PEP (£m) % change
2013/14 1,230 2 532.1 7 1,120 7
2012/13 1,210 0.5 497 2.26 1,050 -0.9
2011/12 1,183 0.8 486 6.63 1,060 -3.6
2010/11 1,182 12.6 455.8 17.5 1,100 0
2009/10 1,050 -3.76 388 -0.5 1,100 5
2008/09 1,091 7.38 390 -12.8 1,047 -6.7
2007/08 1,016 14.5 447 23.1 1,122 9.46
2006/07 887 20.5 363.2 34.5 1,025 30.1
2005/06 736 10.5 270 22.8 788 20.1
2004/05 666 2.15 219.8 12.1 656 7.72

Table 2, Clifford Chance: a decade in numbers

  Turnover (£m) % change Profit (£m) % change PEP (£k) % change
2013/14 1,359 7 459 14 1,140 16
2012/13 1,271 -2.5 404 -6 1,000 -9
2011/12 1,303 7 431 13 1,078 7
2010/11 1,219 2 381 10 1,005 8
2009/10 1,197 -5 347 13 933 27
2008/09 1,262 -5 307 -33.4 733 -37.4
2007/08 1,329 11.3 461 15.9 1,170 15.3
2006/07 1,194 15.9 397.9 28.6 1,015 25.3
2005/06 1,030 12.7 309.4 24.8 810 24.4
2004/05 914 -3.79 248 5.53 651 15.8

Table 3, Freshfields: a decade in numbers

  Turnover (£bn) % change Profit (£m) % change PEP (£m) % change
2013/14 1,232 0.9 578 5.5 1,480 5.8
2012/13 1,221 7.2 548 2.4 1,398 13.8
2011/12 1,139 -0.9 535 1.65 1,229 -6
2010/11 1,140 0.08 544 -7.6 1,308 -7
2009/10 1,141 -11.3 589 -2.3 1,406 -2.6
2008/09 1,287 9.25 603 1.34 1,443 -2.76
2007/08 1,178 19.5 595 21.4 1,484 43.5
2006/07 986 11.8 490 13.2 1,034 24.6
2005/06 882 13.1 433 22.2 830 18.6
2004/05 780 -0.6 354.2 1.2 700 3.7

Table 4, Linklaters: a decade in numbers

  Turnover (£bn) % change Profit (£m) % change PEP (£m) % change
2013/14 1,255 5 557.3 6.8 1,391 5.9
2012/13 1,195 -1 521.9 0.21 1,313 5.6
2011/12 1,207 -1 520.8 1.13 1,243 1.5
2010/11 1,220 3.13 515 1.58 1,225 0.9
2009/10 1,183 -8.86 507 -1.29 1,214 6.76
2008/09 1,298 0.4 513.6 8.94 1,302 9.6
2007/08 1,293 15.3 564 15.1 1,440 25
2006/07 1,121 19.9 490 30.7 1,152 8.5
2005/06 935 16.1 375 29 1,062 26
2004/05 805 11.8 290.8 15.4 843 25.1