The top US law firms are now paying their London partners significantly more than their British rivals, in another sign of American dominance in the UK legal sector.
Partners in the London offices of the top 15 US law firms took away 25 per cent higher payouts than their counterparts in the UK’s top 15 firms in 2022, new research from legal sector accountancy firm Hazlewoods shows.
Equity partners in the London offices of the 15 most profitable US law firms generated average profits of £1.23m, compared to average profits of just £985,000 in the UK’s top 15 firms, the research shows.
The higher partner payouts come as the result of US firms’ sharper focus on higher-margin M&A and private equity work, as well as their avoidance of low margin areas such as employment law, the report said.
“US firms in London have become known for concentrating on what they see as the most profitable work,” Hazlewoods partner Ian Johnson said.
“It can, however, leave them more exposed to changeable market conditions such as a downturn in M&A and PE if markets get spooked by economic events like those we’ve been seeing over this past year,” Johnson said.
By contrast, UK law firms ‘full spread’ models put them in a better position to weather any coming economic storm, in hedging their businesses by giving them a foothold in areas that might be boosted by a recession.
Either way, the top 15 US law firms’ higher partner payouts put them even further ahead of their British counterparts in the ongoing battle for talent, that has seen lawyers pay surge over the past two years.
US law firms’ higher partner payouts place them in a position to further solidify their position in London, potentially attracting, or poaching, top lawyers from British rivals.
The research comes as US law firms have also continued to push up salaries for newly-qualified (NQ) lawyers in London, despite warnings the current economic downturn could lead to a major slowdown in work.
For reference, the UK’s prestigious ‘Magic Circle’ firms offer their newly-qualified salaries ranging from £107,500 in Linklaters and Allen & Overy to £125,000 in Freshfields and Clifford Chance.
Meanwhile, the highest-paying US firms offer NQ salaries of well over £150,000 per annum, with those at the top end of the pay scale – such as Akin Gump – offering up to £179,000 a year.