Lawyers' pay soars to go-go Eighties levels
Monday 16 September 1996
The annual Legal Business 100 shows that the total revenue for Britain's 100 largest firms of solicitors in the financial year 1995-96 was pounds 3.25bn, pounds 250m more than the total for the previous year. However, the top five City firms - termed the "premier league" - accounted for much of this rise. Clifford Chance, by far the largest UK-based firm with more than 1,500 partners and other fee-earners, saw income rise by pounds 52m to pounds 282m; both the second-placed firm, Linklaters & Paines, and third-placed Freshfields were about pounds 15m ahead, with pounds 187m and pounds 154.6m respectively; Allen & Overy, in fourth place, was up pounds 10m at pounds 138m and fifth-placed Slaughter & May's fees rose pounds 7m to pounds 133m. At the bottom of the table, the Edinburgh-based Brodies moved up from 100th place to 98th equal with a pounds 100,000 rise in fees to pounds 8.3m.
The list's average profits per partner - which are not the same as take- home pay since firms often retain some of the money for investment, and typically require partners to supply working capital - rose sharply from last year's pounds 159,000 to pounds 181,000. However, there was a wide spread, with senior partners in leading firms earning more than twice as much as the average, and junior partners at the smaller firms seeing profits of well under pounds 100,000.
Though the figures compiled by Legal Business magazineclearly put City lawyers in a different league from their counterparts in the high street, they demonstrate that leading solicitors' earnings are roughly similar to those of other corporate advisers, such as merchant bankers and accountants, and to those of the business executives whom they advise.
But the report also contains further evidence that the legal community is following the accountancy world in dividing into a dominant leading group, a middle tier and a collection of niche players. Three of the top five firms - Clifford Chance, Freshfields and Allen & Overy - are increasingly set upon becoming global businesses, with Clifford Chance reportedly gaining a third of the year's turnover from its overseas offices. For this group, the main opposition comes from US-based firms rather than other UK practices.
In the chasing bunch of firms placed between sixth and tenth - "division one" - some showed how results can be skewed by involvement in one or two high-profile deals. For example, eighth-placed Simmons & Simmons, with turnover of pounds 86.8m, is known to have earned pounds 15m alone from work for Railtrack, the privatised rail operator.
Among niche players, such well-known "blue-blood" firms as Farrer & Co and Withers, with fees of pounds 13.5m and pounds 12.4m respectively, have fared well on the back of expertise in representing wealthy private clients.
Catrin Griffiths, editor of Legal Business, said: "Corporate work certainly underpinned the rise in revenues and profits this year. After years of recession and with the number of fee-earners cut to the bone, any sudden increase in work went straight to the bottom line."
However, observers are predicting tough times ahead for many of the firms that are not either very large or very specialised. Last week there was a development widely seen as a harbinger of things to come. Arthur Andersen, the global accountancy firm, signalled the accountant's growing intrusion on legal territory by announcing it was merging its Spanish legal operation with one of the country's leading law firms.
The legal business's top earners
Firm Gross fees
1 Clifford Chance pounds 282m
2 Linklaters & Paines pounds 187m
3 Freshfields pounds 154m
4 Allen & Overy pounds 138m
5 Slaughter & May pounds 133m
6 Lovell White Durrant pounds 113m
7 Herbert Smith pounds 89m
8 Simmons & Simmons pounds 86.8m
9 Norton Rose pounds 72m
10 Ashurst Morris Crisp pounds 62.1m
Firm Profits per partner*
1 Slaughter & May pounds 460,000
2 Allen & Overy pounds 445,000
3 Linklaters & Paines pounds 381,000
4 Clifford Chance pounds 372,000
5 Freshfields pounds 352,000
6 Macfarlanes pounds 343,000
7 Ashurst Morris Crisp pounds 340,000
8 Gouldens pounds 323,000
9 SJ Berwin & Co pounds 316,000
10 Herbert Smith pounds 290,000
* Not take-home pay
Source: Legal Business 100
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