With daily headlines reminding the City of the Brexit-induced crisis engulfing the UK, the Legal Business 100 (LB100) has shrugged off the pervasive uncertainty to post another year of robust growth.
Amid the increasing probability of the UK facing a wrenching ‘no-deal’ exit from the EU on the looming 31 October deadline, the LB100 results show the UK’s leading law firms driving collective revenues up 9% to £26.35bn.
The group achieved total profits of £8.28bn, a figure that has now doubled over the last ten years, a remarkable achievement given the challenging post-banking crisis trading environment. Profit per equity partner was up 5% to an average of £847,000 across the group, with a dozen firms crossing the £1m barrier.
This latest performance mirrors the well-established dynamic since the banking crisis of 2008/09 recast the market for high-end legal services, with many traditional leaders struggling to sustain growth, while firms ranked in positions 11 to 35 in the LB100 have been the standout performers. As such the Magic Circle posted another year of solid but unspectacular growth, despite the deal markets holding up better against the backdrop of fraught Brexit talks than some feared, with the big four internationalist members of the group packing tightly together.
Larger firms that excelled this year include DLA Piper and Eversheds Sutherland, as well as Ashurst, which achieved a much-needed rebound after a troubled period. Standout performers outside the top ten include insurance leader Clyde & Co and nationally-bred players like Pinsent Masons, Addleshaw Goddard and Osborne Clarke, while large City mid-tiers were once again on superb form. Among this crowd, Taylor Wessing, Fieldfisher, Stephenson Harwood, Travers Smith and Mishcon de Reya were heavy contributors to the 28 firms across the 100 that achieved double-digit revenue growth in 2018/19.
For firms generating less than £150m in revenue, results diverged widely but included some stellar performances from firms in the regions, among them TLT, Freeths, Shoosmiths, Brodies, Browne Jacobson and Foot Anstey. Meanwhile, a handful of specialist players of varying size – including Kennedys (insurance), Stewarts (litigation), Sackers (pensions), Lewis Silkin (employment) and Forsters (real estate and private client) – were among the firms with cause for cheer.
The results also underline the increasing concentration of power in the upper reaches of the LB100 table. Thanks in part to consolidation, the top 25 is now generating 79% of the top 100 firms’ revenues, £20.8bn, and has doubled its income over the last decade. In contrast, the second 50, generating $2.2bn, has increased only 26% over the same period, reflecting the challenge for firms outside the top 40 without strong market positioning.
The results also demonstrate the extent to which more tightly-focused law firms have generally outperformed more generalist rivals in recent years and the fact that many of 2019’s strongest performers have been consistent pace-setters for five to ten years.
But despite this outwardly confident showing for the UK industry, the results did not quite match the pace seen in 2017/18, with the crucial revenue per lawyer metric edging up only 2% to £363,000. Stripping out the impact of some sizeable mergers on top-line figures would mean organic revenue growth across the 100 of around 6%.
After a credible performance, the profession now faces a slowing economy at home and abroad amid mounting unease generated by a government under Prime Minister Boris Johnson hitting an increasingly Trumpian tone on forcing the UK out of the EU. A no-deal exit also has huge implications for the profession’s access to the EU (see focus).
With the UK’s institutions and constitutional stability coming under intense strain, the profession’s hope must be that developments expected of a banana republic rather than the Mother of Parliaments can stay confined to Westminster, and away from wider economy.
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LB100 revenue change 2010-19