Magic circle firms struggle to keep up with US rivals

Madeline Ratcliffe
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Elite UK law firms are losing out to their American competitors, who are dominating M&A
BRITAIN’s elite law firms failed to track the country’s improving economy and reported a combined turnover of £20.64bn, a one per cent drop in earnings from 2014.

Figures released by Legal Business magazine today show that the number of lawyers employed by the largest 100 firms in the UK, has also fallen, down two per cent to 64,024.

With the economy looking better and more ligation work available – especially a surge in mergers and acquisitions work – firms had hoped that things would pick up in 2015.

But while DLA Piper maintained its position as the UK’s largest law firm in terms of turnover it is no longer the world's largest firm, with revenue dropping four per cent to £1.5bn.

Other big City players Clifford Chance, Hogan Lovells and Ashurst also saw turnover fall, with Linklaters and Freshfields struggling to achieve any meaningful growth.

Legal Business editor-in-chief Alex Novarese told City A.M.: “It’s a bit of a mystery [why the magic circle firms have been hit].”

“The obvious thing is that American firms are dominating markets here, especially in global M&A,” he said. “US regulators are driving activity, but also American investors are being used for leveraged finance projects. M&A is being driven by American money.”

This all gives US giants an edge when securing business, and they continue to dominate the world leaderboard, clocking up five per cent growth and revenues up to £60.1bn ($92.87bn).

Novarese said: “London law firms have been struggling for five or six years now, but this year was meant to be the comeback year”. He added: “London firms were in the ascendency before 2008 [but] their American rivals were more successful at restructuring after the banking crisis. London firms are less nimble. They’re more corporate, and have a global outlook, which makes it harder to slim down. They still face real structural challenges.” None of the Magic Circle firms wanted to offer comment.