Legal Business Blogs

Mixed bag for Clifford Chance as it joins the £2bn revenue club but profits and PEP stall

Clifford Chance (CC) today (19 July) became the second Magic Circle firm to post revenues in excess of £2bn after Allen & Overy achieved that milestone last week.

CC’s headline turnover figure of £2.062bn showed an increase of 5% on last year’s £1.969bn, and marks the eighth consecutive year of revenue growth for the firm.

However, profit remained more or less flat at £781m, compared with a 9% uptick to £783m in 2021/22.

Profit per equity partner (PEP) dipped slightly from £2.04m to £2m, in contrast to last year’s bullish 10% growth.

The firm put its flat profitability down to increased costs. ‘Lawyer salaries are our largest cost’, admitted chief financial officer Patrick Glydon, pointing also to investments in real estate, IT, and business professionals’ salaries.

Global managing partner Charles Adams acknowledged upward pressure on NQ and junior salaries, driven in large part by ultra-competitive US firms: ‘Clifford Chance is a multi-jurisdictional, multi-product firm. We compete with US firms in some of those sectors and geographies. Where we do compete, we have to be able to remunerate our people at competitive rates.’

Global litigation and dispute resolution was the key driver of growth, with ‘increased activity levels across all areas’. At the same time, CC reported steady performance in non-contentious work: ‘Despite a year of subdued M&A activity across the industry, our transactional teams maintained positive momentum buoyed in part by an active tech sector and private capital fund raising’, noted Adams. ‘Demand for our global advisory expertise was robust.’

Looking ahead to 2027, CC has in place a four-year growth plan focused on what Adams called ‘our one-firm priorities of client experience and operational excellence’. With what it calls its ‘People and Talent Strategy’, CC aims to continue to make lateral hires in core areas around the globe, with Adams noting ‘private capital, energy transition, infrastructure, tech including AI, and healthcare and life sciences’ as key growth areas.

‘Our US capabilities remain our top priority’, he said. The firm reported that 42% of its 24 lateral hires in FY2023 were in the US, and noted that this figure does not include the seven partners it recruited to open its Houston office.

Glydon also commented on US growth: ‘We were flat in the US in the first half of last year, as our international competitors were. But we saw high single-digit growth in the second half of the year, and that has continued into this year.’

Adams said that the firm was ‘not pursuing’ a US merger, but was instead focusing on ‘steady and sustained growth’ and ‘a progressive and constant buildup’. However, he noted, ‘we would not rule out any option in pursuit of that strategy.’

Similarly, the firm did not rule out further office openings, both in the US and around the world. ‘The answer is a sort of constant maybe’, said Adams. ‘We shall see what sort of talent we can recruit, and what opportunities we can unlock.’