This year, 24 London-headquartered and boutique firms can be found in the second half of the LB100, experiencing an average revenue of £57.3m from last year’s £53.4m. This 7% increase almost matches the average revenue growth experienced by the firms across the entire LB100.
Taking a closer look at the breakdowns of the group’s performance tells us that in FY22/23, the average number of lawyers among the City and boutique firms is up by 16% from last year to 207 from 179. However, profit per lawyer for the group is up 4% to reach 2021 levels at £85,000.
Traditionally the most inconsistent segment of the LB100 firms, the shifts in the average results of the group are usually a result of firms that flit between the first and the second half of the top 100. An example of which is the 8% spike in the group’s profit per equity partner (PEP) number to £492k – a result of litigation specialist Stewarts re-entering the second 50 following its record-breaking performance last year.
Putting overall average performances to one side, examining individual firm results reveals which strategies are (and are not) working for the specialist and mid-sized London firms in the second 50 of the LB100, although there are many factors beyond their control during times of economic hardship and political instability.
‘That’s a trilogy of tragedies waiting to happen,’ surmises managing partner of Russell-Cooke, James Carroll, on his concerns regarding the Ukrainian War, inflation and the rise in interest rates. ‘Having all of those factors happening at the same time means that you need to approach everything cautiously. At the moment, we are planning in advance by looking at getting our cost base and pricing strategy in place so that we sustain the stable position we have always had. No firm should ignore what is happening in the wider world.’
‘We are planning in advance by looking at getting our cost base and pricing strategy in place so that we sustain the stable position we have always had.’
James Carroll, Russell-Cooke
While Carroll’s advice may appear obvious, he points out that firms run the danger of conflating a thriving economy with a successful strategy: ‘What you see sometimes, is either this complacency in the good times, or firms misinterpreting a stable economic and political situation for a successful strategy. You need to be cleverer than that and realise that, yes, things are going to be good in the good times, but you’ve also got to guard against instability in the more challenging times.’
Readers may want to pay heed to Carroll’s words as, despite the unpredictable economic conditions of 2022 and 2023, Russell Cooke reported an impressive 19% rise in revenue since last year, climbing eight spots in the LB100 table.
‘As things get tougher out there, we need to keep a very close eye on cash, as that is what we run on’ says Andrea Zavos, senior partner at Boodle Hatfield, echoing a similar sentiment to that of Carroll. ‘Ensuring that we are doing the work, getting the bills out, and getting them paid as quickly as possible,’ she adds.
However, Zavos also considers that the services which Boodle Hatfield offers ‘is more resistant to economic turmoil than the big corporate firms,’ particularly noting the recent success of its private client practice, immigration and employment practices.
This year, Boodle Hatfield posted the best financial results in its 300-year long history, reporting a 7% rise in revenue while maintaining its position in 100th place.
It has become apparent during the research for the LB100 report that the firms which provide a full-service, rather than specialist offerings, have been better able to overcome the financial obstacles which FY22/23 presented. An example of this can be seen in pensions boutique Sackers which, although a perennially profitable firm with a profit margin far higher than the vast majority of LB100 firms, recorded just a 3% increase in turnover while PEP fell 8%.
Most notably, disputes specialist Stewarts experienced a 27% drop in revenue, falling 12 places from 45th position and re-entering the second 50 in 57th place. Following Stewarts’ unprecedented 43% revenue spike to £113.6m in 2021/22 and it’s monumental 93% rise in PEP, the stark contrast to this year’s performance is hard to ignore.
While the declines are significant, the firm stressed in the summer that they are in line with what it has for several years referred to as a ‘non-linear’ growth pattern – a result of contingent fee arrangements. ‘I am pleased to announce a solid set of financial results’, said managing partner Stuart Dench. ‘As a disputes-only law firm, our revenue is non-linear, and this represents a good core income performance and is our second-highest revenue year.’
But others have experienced far less sporadic growth. Take Howard Kennedy, which posted a 7% increase in turnover and a modest 5% fall in PEP last year. ‘We have thrived as a firm. Where other firms are subject to the ebbs and flows of market changes our full-service offering means we continue to prosper. This allows us to benefit from the opportunities which arise through an array of market conditions,’ summarises managing partner Craig Emden.
‘It is a double-edged sword though,’ he acknowledges. ‘When one sector benefits, another sector doesn’t. In a buoyant market, everyone does well, but we can still do well when the market is less buoyant.’
‘Our strategy is to remain independent. We don’t want to go around planting flags everywhere.’
Stephen Smith, Bristows
Meanwhile, Fladgate’s managing partner Grant Gordon is upfront about the firm’s ambition to diversify its practice areas: ‘We are a transactional firm, with most people recognising us as having corporate and real estate as our primary practice areas. However, over the next 12 to 36 months, we will continue to diversify and flesh out consolidate the contentious and advisory sides of our practice.’
Fladgate climbed two places in the LB100 to 60th place, reporting an 11% rise in its revenue since 2021/22 and 41% growth over the last five years.
Speaking to the importance for firms to remain open to possibilities beyond their traditional roots, Gordon notes: ‘Generally we are an entrepreneurial and opportunistic firm. If we are presented with good opportunities, we look at them.’
The path to revenue growth stood out as a divisive topic among the firms in the second 50, many of which were steadfastly against the idea of mergers or the lateral hiring of teams from other firms, preferring the organic route. Indeed, in an era of unprecedented economic and political uncertainty, the question of how to grow in a way that is sustainable and profitable is one that all firms want to know the answer to.
‘We often talk about organic growth through the development of existing practice areas and our ability to respond to novel instructions from existing and new clients,’ outlines Sam Macdonald, a member of Farrer & Co’s executive board, on the firm’s focus on natural expansion. ‘Historically, we have only rarely brought in whole teams from elsewhere. We are not closed-minded about doing that, and certainly welcome lateral hires, but our primary strategy for growth remains the same, rather than, for example, looking to open overseas offices, or entering into a big merger.’
As the highest-ranked London-only firm in the second half of the LB100, Farrer’s strict prioritisation of organic growth appears to be working, having achieved a modest but promising 5% increase in revenue to £91m and climbing one place in the table since last year, while revenue is up 44% over the past five years.
‘Our strategy is to remain independent. We don’t want to go around planting flags everywhere, but will focus on being where we need to meet our clients’ needs,’ asserts Bristows’ joint managing partner, Stephen Smith, sharing a view similar to Macdonald’s on the topic of growth. In contrast to Farrer & Co, however, Smith says that Bristows ‘has never ruled out laterals.’
He adds: ‘We are not trying to become the next global superstar. We can operate very well within the niches and the markets that we do.’
‘The number of high-quality laterals that have arrived is part of our strategy to be able to deliver premium solutions,’ states Fladgate’s Gordon, who appears more open to the concept of quick expansion. ‘We are really building out our capabilities to make sure that they are absolutely right for our clients, who tend to be entrepreneurial and fast-moving small to medium-sized businesses and ultra high-net-worth families.’
John Banister, chief executive of Wiggin, points out the threat which the prospect of expansion presents to the integral culture of the firm: ‘We are not looking for growth in headcount. Wiggin has historically had a unique culture and there are challenges in maintaining that as you grow as expectations of fee earners change.’
He explains the important role that Wiggin’s culture plays in attracting and retaining talent: ‘Most of the people who leave us go in-house, and very few go to other law firms as the people who come to us enjoy it. As you grow, it becomes harder to hold onto that.’
‘The A&O Shearman merger was the starting button on the mid-sized market merger mania,’ analyses Lewis Silkin’s co-managing partner, Jo Farmer. ‘We talk about being fiercely independent and we mean it.’
Farmer leans more on the side of resistance to the prospect of forced growth, while acknowledging the importance of natural evolution: ‘This comes back to the question of quality and culture – we are not interested in growth for growth’s sake. However, you also have to grow to not stay still.’
‘We have grown rapidly over the past few years,’ elaborates Richard Miskella, the other co-managing partner of Lewis Silkin. ‘The Manchester and Leeds teams need to keep growing to do what we want them to do, as well as the Dublin and Belfast teams. We had really strong growth in Hong Kong, but there is still more work to do there than they can manage so they will continue to grow too.’
This year, Lewis Silkin experienced a 16% hike in revenue to £85.8m and has climbed four places in the LB100 table to number 54 as a result, while PEP remained static. Turnover is up 62% over five years.
Russell-Cooke’s Carroll also makes clear the firm’s decided position on growth: ‘We have maintained a strategy for decades now that we are a firm that grows primarily organically and from strategic lateral hires. We are quite different for the market in that we have a proactive strategy of saying that we are not particularly interested in a major merger.’
Keystone’s chief executive James Knight has a slightly different take on the topic of expansion, in that the firm’s business model is built on the continual acquisition of new practitioners and their clients: ‘Keystone’s growth trajectory, like other ambitious platform firms, is by the recruitment of quality lawyers who operate in areas that we offer to our clients. That is an ongoing process, as unlike conventional law firms, we will recruit when we have demand because we are recruiting lawyers who are bringing clients with them for themselves and for their Keystone colleagues.’
Another successful City firm in the second 50 group, Keystone has risen to 59th place on the table from 60th place after reporting an 8% year-on-year increase in revenue to £75.3m. The rapid expansion of the business has seen turnover grow by a striking 138% over the past five years.
Overall, it is important to note that, although nothing groundbreaking or new, it is true that the firms that have managed to overcome the significant obstacles presented by FY22/23 champion a forward-thinking, adaptable and open-minded approach to challenges and potential opportunities. Firms that insist on sticking to their roots and choose to bypass profitable options are unlikely to benefit from such strategies in the long term. LB
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Carbon footprint: environmental impact of the LB100
Around half of LB100 firms provided data for their carbon footprint, expressed as tonnes (t) of carbon dioxide (CO2) equivalent (e), and in most cases independently verified. Where possible, we have divided the tCO2e figure by the number of lawyers at the firm to obtain an illustrative ‘impact ratio’.
The firms are sorted into bands below, with those with a larger global headcount inevitably having a higher impact ratio.
| Net zero, or less than 0.1 | 0.5-1 | 1.5-2.0 | 5.0-10.0 |
|---|---|---|---|
| Forsters | Capsticks | Addleshaw Goddard | Bird & Bird |
| 0.1-0.5 | DWF | Foot Anstey | Clarke Willmott |
| Ashurst | Fieldfisher | Gowling WLG | Fladgate |
| Brodies | Osborne Clarke | HFW | 10+ |
| Keystone Law | RBG | RPC | Allen & Overy |
| Mills & Reeve | Sacker & Partners | Stephenson Harwood | Bristows |
| Taylor Wessing | 2.0-5.0 | DLA Piper | |
| WFW | Charles Russell Speechlys | Herbert Smith Freehills | |
| 1.0-1.5 | CMS | Hogan Lovells | |
| Ashfords | Howard Kennedy | Kennedys | |
| Birketts | Macfarlanes | Linklaters | |
| Farrer & Co | Stevens & Bolton | Pinsent Masons | |
| Freeths | TLT | Shoosmiths | |
| Knights | Trowers & Hamlins | Simmons & Simmons | |
| Michelmores | |||
| Stewarts | |||
| Walker Morris | |||
| Winckworth Sherwood | |||
| Womble Bond Dickinson |