Having spent a reasonable chunk of my pundit duties over the last three years noting significant shifts against London’s elite on the global stage, I confess I had expected financial results this year to break that pattern with City leaders managing a more confident showing. Particularly as the Global 100 firms collectively grew revenues by 5% to $92.7bn, while profits increased 7% to $36.43bn.
Unfortunately for London’s finest and my own credibility, that expectation has proved plain wrong because the City’s big four have just posted their most indifferent collective performance since the wipe-out of 2008/09.
True, a weakening euro made the performance look a little softer than it actually was (though a rebound in sterling flattered their results in our Global 100 ranking) but it has still been a very subdued result given a firmer UK economy, masses of cheap debt sloshing around and robust levels of cross-border activity.
Bear in mind, Legal Business last month argued that the Magic Circle need to massively overhaul their locksteps to compete globally before seeing these numbers (though conversely I’m increasingly suspecting the group are more frequently going off-book on pay deals than is commonly thought).
The exception to that gloomy picture is Allen & Overy, which has put in a confident showing this year to overtake Linklaters and Freshfields Bruckhaus Deringer in revenue terms. That means a firm written off by some excitable souls in the mid-2000s as a second division player now generates twice as much revenue as a decade ago and has closed a once-huge gap with its key City peers.
Elite law firms are often inclined to respond that top-line growth is a secondary consideration but that is, of course, not really true – it’s not the only thing that matters but it certainly matters a lot.
True, the Magic Circle firms have dramatically improved per-lawyer productivity and efficiency since the banking crisis but the increasingly urgent question for the group is why they are perennially stuck in New Normal Land while US firms party like it’s 1999.
It’s not just the vagaries of the stronger US economy and financing markets – European corporates have changed their buying habits more than their US counterparts. Legal Business held a reception the week I write these words attended by several dozen senior general counsel and there was a common refrain in the room: bluechip clients in Europe think they can squeeze a lot more out of top law firms… and they intend to. The more-for-less agenda just hasn’t gripped the US to the same extent.
Even amid a patchier US disputes market, leading American firms are powering on and while that has largely yet to translate into major in-roads in the Asia-Pacific region or the Middle East, where London firms remain generally well positioned, in the transatlantic channel and the key finance hubs, the US elite are marching on. Another camp that has some cause for some concern is verein firms, which will have to do better than this if they want to stay in the game.
And that contest is being driven by an increasingly elite group. As much as there is truly a global market – and the majority of top 50 American firms remain heavily focused on their huge domestic market – a loosely defined group of about 20 US-bred firms are pulling ahead from their counterparts and foreign rivals.
It is tempting to conclude that the time for strategic half measures is long past for any practice hoping to secure a lasting place in the Global 50, where the real tournament is. But if you need to be told that, maybe you’re just not a contender anymore.
alex.novarese@legalease.co.uk
For full analysis of the performance of the world’s largest law firms by revenue, see our Global 100 Overview – Heavyweights