Top five law firms in pay bonanza despite flat profits

Top partners at the country’s five most prestigious law firms have shared in a £2.2 billion pay jackpot, according to new research, as Freshfields and Linklaters unveiled contrasting annual results today.

Despite virtually flat numbers from some in the elite Magic Circle of firms — Linklaters’ pre-tax profit was up only 1.6% to £521.9 million — four of them still increased profit per equity partner, a key growth measure, by at least 1%.

The figures, which were collated by Legal Business in its annual survey of the world’s biggest law firms, found that fewer than 1800 lawyers shared the estimated £2.2 billion, meaning they could typically enjoy pay of between £1 million and £2 million each.

These kind of amounts have led leading City lawyers outside the magic circle to question whether or not these firms have failed to keep tabs on pay at a time when their clients have had to cut costs to counter the effects of the global downturn.

Linklaters confirmed that profit per equity partner was more than  £1.3 million in the 12 months to April, up by £73,000 on the previous year.

Turnover for the firm that advised on the Glencore-Xstrata mining mega-merger was a little under  £1.19 billion, an almost identical figure to Allen & Overy, which reported yesterday.

Managing partner Simon Davies said that there were signs in recent months that the demand for legal services was picking up and that Linklaters had increased its “client roster” among the FTSE 100. He added that the increase in pay for partners was “principally driven by efficiencies”, and confirmed that the next stage of the firm’s international expansion was to open in South Korean capital Seoul.

Freshfields announced the best results of the Magic Circle so far — Slaughter & May and Clifford Chance are still to come — with a 7.2% hike in turnover to £1.22 billion.

Equity partners each took home an additional £82,000 to take their pay to £1.4 million.

Ted Burke, global managing partner at Freshfields, said: “Looking ahead, we expect continuing strong demand for advice around complex new regulatory regimes, cross-border litigation and global regulatory investigations, and we hope that, in the medium term, transactional activity will also increase as confidence in a sustained recovery in the global economy strengthens.”