The headline isn’t great, but it’s not bad either. Judging our annual Legal Business 100 (LB100) results, the industry has done better than expected overall, at least compared to 2015, when the group barely achieved growth despite a relative rebound in the UK and global economy.
This year, revenues across the LB100 dipped 2% to £20.2bn, heavily influenced by the removal of Dentons and Squire Patton Boggs from our tables. Back-of-the-envelope calculations show the group managed to hike income by roughly 3% on a like-for-like basis. Given the slowing of deal activity since the start of 2015 and some easing of investment ahead of the EU referendum, it could have been worse.
While recent years have challenged conventional wisdom about the legal industry, with the mid-pack comprehensively outpacing the top 25 firms, 2015/16 played more to expected form. Larger firms were a little stronger and mid-tiers less consistent.
This was notable at London’s big four Magic Circle firms, thanks to a robust showing from Freshfields Bruckhaus Deringer, with the quartet collectively hiking revenues by nearly 4% to £5.33bn. Nevertheless, the longer-term performance of the City’s elite is problematic; revenue growth in the group since 2011 ranges from 17% for Allen & Overy to 9% for Linklaters. Which isn’t great.
Given the slowing of deal activity since the start of 2015 and some easing of investment ahead of the EU referendum, it could have been worse.
Down the food chain it was more mixed, with Herbert Smith Freehills posting a decent result, and DLA Piper and Hogan Lovells putting in promising numbers (Hogan Lovells certainly needed them). Simmons & Simmons and Berwin Leighton Paisner had less to celebrate, but the clear loser is Ashurst, whose performance has been weak for years now.
While this year is less obviously positive for City firms outside the top 25, it is all relative. Macfarlanes paused for breath at a point most firms would love to pause, but Mishcon de Reya, Travers Smith, Stephenson Harwood, RPC and Fieldfisher powered on, while Osborne Clarke and Withers moved up a division on the back of sustained momentum.
There are also a lot of robust performances outside the top 50 from City firms with defined practice focuses, with disputes specialist Stewarts Law again the stand out, alongside others like Bristows and Fladgate.
It is also a good year for firms with clear regional patches, a bit of ambition and solid organisation. TLT bursts into the top 50 after a confident five-year run, but there is also a host of regional players in strong form, among them Mills & Reeve, Burges Salmon, Browne Jacobson, Brodies, Foot Anstey and DMH Stallard.
It is hard to find common ground between such a range of firms, but none of them are trying to be all things to all clients. This group are either closely associated with several practices, industries or regions. There is no reason to believe momentum will not stay with such firms in the years ahead.
There is no sign, of course, of the legal industry returning to the growth it enjoyed before the banking crisis. Profit per equity partner across the group at £699,000 remains below the 2008 record of £703,000. So often written off, the legal industry continues to defy the critics without moving into revival. Our results suggest the LB100 is slowly leaking market share. At a time of booming demand for commercial law advice, a small but growing chunk of work is going to alternative providers and a larger slice has moved in-house or to US rivals. And those are big issues to leave on the table.