Case is closed for ever-rising lawyers' fees

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The Independent Online
LONDON's leading law firms performed better than they expected in achieving a small rise in turnover in the last financial year.

Surprise was the most common reaction to the continued - if rather flat - income growth enjoyed by the top firms, according to Legal Business magazine, which carried out the survey published this weekend.

Although the gross fees of the leading 35 City practices improved slightly to more than pounds 2bn in 1991-92, there is unlikely to be any celebration. The performance is nothing compared with the 20 per cent or more revenue growth of the late 1980s. As one senior partner quoted by the magazine said: 'The old days aren't relevant anymore. If people are going to think that way, they're going to be disappointed.'

Clients' growing awareness of the strength of their bargaining position has put pressure on fees and led to some provincial firms winning business that would once have been the preserve of the City practices. At the same time, the squeeze on costs is fuelling rumours of further big lay-offs to add to the 1,000 salaried solicitors estimated to be on the streets already. But insolvency and litigation work are said to be booming and there are growing signs of the kind of split seen in the accountancy profession, where there are the big six followed by two tiers.

'The top-ranking firms continue to pull away from the mid- ranking firms, as they are benefiting from their ability to invest in overseas offices and information technology,' says the magazine.

While firms with more than 500 fee earners pulled in more than pounds 100m, others were in serious financial trouble and at least one was being kept going by the banks, said John Pritchard, the magazine's editor.

'There's a change in attitude in that all those overpaid lawyers are beginning to accept that some of the goals they had can no longer be achieved,' he added.

Most of the firms deny that they have made any of their staff redundant, but there have been cutbacks and this has put pressure on the remaining fee earners. In addition, many firms are making fewer fee earners equity partners. For instance, Slaughter and May has made up just one partner in the current financial year, against the 10 it elevated in 1991-92.

'It's a shaking-out. They're getting rid of a lot of the people they shouldn't have taken on in the boom,' said Mr Pritchard.

He also suggested that firms were largely victims of rising rents on their offices rather than a fall-off in legal work.

And while the top solicitors' income paled beside the pounds 250m-plus gross fees and pounds 500,000 average profit per equity partner estimated for the likes of Skadden, Arps, Slate, Meagher & Flom in the US, they did not seem to be feeling the effects of the recession as much as some of their clients.

'The bottom line is that lawyers - as always - are not doing too badly,' said Mr Pritchard.

----------------------------------------------------------------- GROSS FEES ----------------------------------------------------------------- FIRM pounds m 1 Clifford Chance 244.5 2 Linklaters & Paines 154.0 3 Freshfields 135.0 4 Lovell White Durrant 120.0 5 Slaughter and May 113.0 6 Allen & Overy 112.0 7 Simmons & Simmons 92.5 8 Herbert Smith 89.0 9 Norton Hall 74.0 10 Denton Hall Burgin and Warrens 63.0 ----------------------------------------------------------------- All figures have been rounded up or down to the nearest pounds 500,000 -----------------------------------------------------------------