Partners at Clifford Chance will pocket an average of £1 million this year after Britain’s biggest law firm continued to bounce back from the financial crisis.
Tight cost controls and a modest upturn in revenues led to profit per partner nudging back into seven figures for the first time in three years, despite conditions in the commercial legal market remaining tough.
Clifford Chance, which depends on big banks and investment funds for a large part of its business, was the worst hit of Britain’s leading law firms by the financial crisis. Partners’ profits topped £1 million in the boom times but fell to £733,000 per partner in the depths of the crisis.
After a shake-up that included shedding 15 per cent of its partners, it has clawed back much of the ground it lost on the “magic circle” rivals Allen & Overy, Freshfields Bruckhaus Deringer and Linklaters, which held profits above £1 million per partner even as the market for top-end legal work dropped away.
Clifford Chance and Allen & Overy each returned to growth last year because of rising demand for legal services in new markets such as Asia and the Middle East, according to their latest full-year results.
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Fee income at Allen & Overy was up 7 per cent to £1.12 billion for the year to May, after falling 4 per cent the previous year. Clifford Chance’s revenues rose 2 per cent to £1.26 billion, after falling by 5 per cent in 2009.
Analysts said that the rate of growth at both firms was short of the double-digit increases seen before the financial crisis, emphasising the tough conditions that law firms are still facing in Britain, Europe and America.
Clifford Chance said that revenues in Britain grew by only 1 per cent to £430 million. Fees from its other European offices were down 2 per cent to £467 million, despite it holding on to coveted business advising the European Financial Stability Fund on its loans to Portugal and Ireland and acting for the underwriters of Glencore’s $10 billion (£6.2 billion) flotation.
Wim Dejonghe, Allen & Overy’s managing partner, said that law firms were suffering from a lack of big takeover deals. “It’s going to be patchy going forward,” he said. “The times of everyone every year showing [double-digit] growth are gone.”
Demand for legal services in Asia and the Pacific, in contrast, has been growing rapidly. Clifford Chance has moved into Australia by acquiring two boutique corporate law firms, and 12 of its 23 partner promotions this year were in Asia. David Childs, the managing partner, said that revenues across the region rose by 16 per cent this year to £145 million and that this was expected to double within three years.
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Allen & Overy has doubled the number of partners in Asia to about 90, Mr Dejonghe said.
Freshfields and Linklaters are expected to give their full-year results this week.