UK law firm revenues top £15bn in 2011

Elizabeth Fournier
AFTER a bleak couple of years for the UK’s legal sector, revenues at the country’s biggest law firms are looking far healthier this year, as the most successful firms look to international markets and strategic mergers to grow profits.

Total revenues at the top 100 law firms in the UK rose by 13 per cent this year, hitting £15.5bn according to the latest Legal Business 100, the trade magazine’s annual look at the country’s top 100 solicitors, published today.

Average net income across the top ten firms rose by two per cent in 2010-2011, compared to a fall in net income of 3.5 per cent for previous year.

Things seem to be looking up, and the relative return to health means that partners at the most successful firms are reaping the benefits.

DLA Piper’s top partners earned an average of £2.5m in 2011 – up a staggering £1m from last year’s figure, and though gains at the rest of the top ten earners were more modest, only three of the highest pay packets among the top ten firms decreased.

Top pay rose by £200,000 at Berwin Leighton Paisner, and was up £162,000 at Slaughter and May.

City favourite Slaughters also booked the most impressive profit margin, at 49 per cent, on a turnover of £440m.

Profits per equity partner (PEP) at the corporate-focused firm rose by seven per cent to lead the field at £1.75m, well above its nearest rival Freshfields Bruckhaus Deringer, which saw PEP fall by seven per cent on revenues flat at £1.14bn.

Despite its lack of growth, Freshfields remained among the elite City firms reporting a turnover of more than £1bn, joining Clifford Chance, Allen & Overy, Linklaters, DLA Piper and Hogan Lovells at the top of the table.

That the latter two are among the leaders of the pack is testament to the increasing influence of UK law firms’ overseas operations on their top line.

DLA Piper for example, which jumped four places from last year’s ranking to the top of the table, garners just 22 per cent of its annual revenue in the UK.

The firm’s global revenue was taken into account for the first time in this year’s survey, an acknowledgement of the increasing popularity of its Swiss Verein structure, which separates liabilities within an international network.

Norton Rose – another convert to the Swiss Verein model – also benefited from its international game plan, growing revenues by 59 per cent in a year that saw it merge with firms in Australia, Canada and South Africa.

“This is the first full year with Australia as part of the group and we are already seeing the benefits,” Norton Rose’s chief executive Peter Martyr told City A.M. in June, when the firm released its latest figures.
And though many of the highest earning firms are still considered as traditional London players, the survey shows they are becoming increasingly reliant on rapidly expanding markets in Asia and other emerging economies are offsetting slightly less impressive domestic performances.
Freshfields now generates 64 per cent of its revenue outside of London, while Allen & Overy books 60 per cent of turnover abroad, and Linklaters 57 per cent.
Even Herbert Smith, which still relies on London for 65 per cent of its revenues, is looking to shift focus, aiming for a 50/50 split between home turf and its 12 international offices.
“It is interesting to compare the UK billings against worldwide revenues,” said Legal Business city editor Emma Sadowski.
“DLA may be the UK’s largest law firm by worldwide revenue, but just 22 per cent of its billings originate in the UK. By UK billings it is only just inside the top 10.”
By a breakdown of UK revenue, Linklaters – headed up by outgoing senior partner David Cheyne – is the highest earner, booking a UK turnover of £510.4m, up three per cent from last year.
Among the mid-table firms, London and New York-based Mishcon de Reya was the star performer, jumping 11 places to 47 in the table as its net fee income rose 37 per cent to £65m.
Litigation expert Stewarts Law entered the top 100 for the first time, after increasing its revenue to £28.5m, a jump of 42 per cent.