Framed by mounting unease in the face of bitter Brexit negotiations, an uncertain business outlook and an inconclusive 2017 general election, the Legal Business 100 (LB100) has defied expectations to post one of its strongest performances of the last decade.
Despite a wider environment harking back to the turmoil and divisions of 1970s Britain, the LB100 shows the UK’s leading law firms driving group turnover up 10% to £24.2bn. The group generated total profits of £7.6bn, for comparison roughly ten times that of FTSE 100 retailer Sainsbury’s, or twice that of banking giant Barclays.
While consolidation at Eversheds Sutherland, Norton Rose Fulbright and CMS flattered headline growth figures for the 2017/18 year, the LB100 still pushed revenue per lawyer up 4% to £355,000. Meanwhile, group-wide profit per equity partner (PEP) was up 9% to £805,000, for the first time pushing PEP comfortably above levels seen during the 2000s boom, albeit before adjusting for inflation.
The figures indicate that well over 1,500 individual partners in the group are now earning more than £1m a year, with more than 100 earning over £2m.
Such a performance from the world’s second largest legal market came despite another indifferent run from top ten firms, the same group that has struggled for momentum since the banking crisis a decade ago.
The LB100 generated total profits of £7.6bn, for comparison roughly ten times that of FTSE 100 retailer Sainsbury’s, or twice that of banking giant Barclays.
While Magic Circle firms were aided by a robust run of big-ticket M&A, the group again tracked behind LB100 growth averages. Clifford Chance arguably had the most to celebrate with a 5% increase in revenue and a 16% hike in PEP to £1.6m. Freshfields Bruckhaus Deringer was also on firmer ground after a troubled 2016/17, and secured the highest PEP of the big four Magic Circle players at £1.734m.
It was once again a strong year for quality midmarket operators, with many of the strongest performers in the 11 to 35 band based on revenue terms.
Among the standout institutions were Simmons & Simmons, Osborne Clarke, Fieldfisher, Macfarlanes and Travers Smith, which all comfortably recorded double-digit revenue increases. There was also a notable hike in revenue for thrusting national player DWF as the firm gears up for the largest ever law firm float as it drove up 17% to £236m.
Two remarkable performances from Macfarlanes and Travers Smith saw the former achieve profitability higher than four Magic Circle firms, while the latter pushed PEP past the £1m barrier for the first time. There are now ten partnerships in the LB100 with PEP of £1m or greater, despite falling profits this year at Mishcon de Reya and Stewarts.
A strong showing from larger midmarket firms helped push the top 25 firms as a group up 11% to £19bn, 80% of the LB100 revenues. Fortunes outside the top 40 UK firms were sharply divided between City and regional players achieving traction and those adrift in price-sensitive areas of the market.
Winners in this camp included City firms Harbottle & Lewis, Penningtons Manches and Lewis Silkin, while regional thoroughbreds TLT and Mills & Reeve were on expansive form.
While insurance-heavy outfits with strong international networks like Clyde & Co and Kennedys looked confident, it was another tough year for players struggling for market positioning. Ince & Co, Weightmans and Hill Dickinson all saw falls in revenue. In a year of diverging performances, nine of the top 100 saw falls in revenue.
Despite what will be taken as a respectable set of results and reports of solid current trading, law firm leaders are heading into 2018/19 with mounting caution. Aside from concerns over the Brexit talks and the long-term outlook for the City, the profession is wrestling with more demanding plc clients, and tech-assisted changes to working practices and business models.
A winter of discontent cannot be discounted for 2018, let alone the years ahead.
alex.novarese@legalease.co.uk
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