With results continuing to stream in, the initial picture is that the UK’s largest law firms are shrugging off the economic challenges of recent years.
Financial results season is once again in full swing, and the UK’s largest law firms have plenty of reasons to be cheerful, with healthy returns across the board.
Based on the numbers reported by LB100 firms to date, average revenue growth for 2023-24 is sitting at around 10%, a notch up from the equivalent figures of 8% last year and 9% in 2021-22.
(It is of course important to note that this year’s figures do not yet include a number of firms still to report, and previous experience is that those stragglers do tend to be those with less rosy pictures to present.)
Just as notable is the fact that firms have the pep back in their step, with an average PEP increase of around 11% for those that have reported to date – a significant improvement from last year, when minimal PEP growth barely moved the needle.
The magic touch
Among the Magic Circle, Linklaters’ 10% revenue increase to £2.1bn is the highest growth reported by a member of that group this year. The performance also marks the firm’s entrance into the £2bn club after Clifford Chance (CC) and legacy firm Allen & Overy passed the £2bn mark last year.
Pre-tax profit climbed 10% to £942m, translating into an 8% PEP increase to £1.9m. Linklaters managing partner Paul Lewis told Legal Business: ‘We’ve been very strong globally – we’ve had our best year ever in the UK and US, Europe has been very strong and, notwithstanding a challenging market in China, you can look across the firm and it’s been strong across the board.’
Meanwhile, revenue growth of 9% for CC has taken the firm to a new record high of £2.3bn. PEP was up slightly from £2m to £2.04m, back to the figure reported in 2021-22 after a slight dip last time around.
‘We’ve been very strong globally – we’ve had our best year ever in the UK and US.’ Paul Lewis, Linklaters
Global managing partner Charles Adams described 2023-24 as ‘another year of very strong performance’, with record profits enabling the firm to make ‘substantial investments in our global team and operations’.
CC’s results means that it will leapfrog A&O Shearman in the upcoming LB100 table after legacy Allen & Overy posted a modest 3.4% revenue increase to £2.2bn.
While turnover growth at legacy A&O, which formally merged with Shearman & Sterling under the A&O Shearman banner on 1 May, was modest, profit growth was not: the firm reported an increase in profit before tax of more than 17% to a total of £1bn. This took PEP to £2.2m – up more than 21% from the £1.816m reported last year.
Announcing its financial results, the firm said in a statement that the results had benefited from Inflexion’s investment in its aosphere platform. The deal, announced in October last year, saw the PE house take a majority stake in the legal and compliance data platform, which now operates as a stand-alone entity, with A&O retaining a significant minority stake.
Silver and beyond
Beyond the Magic Circle, Herbert Smith Freehills has posted its 11th consecutive year of revenue growth, with a 10% increase to £1.31bn. PEP also saw strong growth, with an increase of 14.5% to £1.315m.
Elsewhere, Ashurst came close to hitting £1bn after revenue climbed 9% to £961m, while PEP was up by 14% to hit £1.336m – a record-high figure that more than makes up for a slight decline last year that edged it down from £1.175m to £1.17m.
Global chief executive Paul Jenkins told Legal Business he is happy with the results for the first year of the firm’s 2027 strategy: ‘We’re clear on where we want to focus, in terms of geography, sectors and practice areas, and it’s very good to see the fruits of that focus.’
Taylor Wessing, meanwhile, has £500m in its sights after a 9.5% increase took global revenue to £480.7m. UK profit also saw a 12.2% rise to £91.7m, up from last year’s £87.1m. While the firm did not disclose PEP, it is estimated to be around £915,000, a 13% increase from £809,000.
Eversheds Sutherland was something of an outlier, posting a modest 3% increase in revenue for its business outside of the US, with profits remaining flat amid what chief executive Lee Ranson described as ‘challenging economic conditions’.
Revenues for Eversheds Sutherland (International) – which reports separately to the firm’s US arm – rose from £730.9m to £749.4m, with PEP inching up by less than 1% from £1.29m to £1.3m.
‘We’re clear on where we want to focus, in terms of geography, sectors and practice areas, and it’s very good to see the fruits of that focus.’ Paul Jenkins, Ashurst
In contrast, Osborne Clarke blew through its target of €500m after posting a robust 19% revenue boost that took the firm to €525m. PEP saw a parallel 11% increase, climbing from £687,000 to £771,000, with UK managing partner Conrad Davies saying the firm had ‘maximised our top line and overall business performance’.
Two other firms celebrating revenue milestones were Travers Smith and Shoosmiths, with both crossing £200m. Travers saw an increase of nearly 10% to reach £215m. PEP, meanwhile, climbed 18% to £1.3m – the highest the firm has ever recorded, with profit up 22% to £77m.
At Shoosmiths, a 5% turnover increase pushed the firm to £206.7m. Profit was up 5% to £66m, while PEP jumped 16% to £781,000.
Profit where it’s due When looking at partner profits, top performers include Charles Russell Speechlys, which saw PEP shoot up by more than 30% to hit £661,000, comfortably offsetting last year’s 3% dip. This came alongside a 13% revenue bump to £218.3m.
Another firm leading the charge on this front was Macfarlanes, with a 23.8% rise to £2.6m – a record high. Annualised results show turnover increased 13.7% to £309.1m at the City firm.
Other City stalwarts to have delivered good news to the market include Simmons & Simmons and Bird & Bird, which both posted revenue growth of 10%. Simmons saw revenue rise to £574m, while PEP rose 7% to £1.076m after a year in which the firm added 24 lateral partners globally.
Meanwhile, Bird & Bird grew revenues to €632m (£545m), in line with last year’s growth rate and marking a 32nd consecutive year of growth for the firm. PEP ticked up by 8% to hit €837,000, with chief executive Christian Bartsch pointing to the momentum provided by the firm’s five-year strategy.
Given the year started with double-digit inflation, interest rate hikes and lingering political and global uncertainty, these figures offer much cause for optimism at UK law firms, with positive PEP growth and recovering deal markets pointing to happier times ahead. All eyes will now be on the LB100 and Global 100 rankings; stay tuned for the full results.
2023-24 results snapshot: top performers for revenue
| Firm | Revenue | % growth |
|---|---|---|
| DWF | £435m | 14% |
| Macfarlanes | £309m | 14% |
| Charles Russell Speechlys | £218m | 13% |
| Stewarts | £95m | 12% |
| TLT | £174m | 12% |
| Watson Farley & Williams | £238m | 11% |
| HFW | £251m | 11% |
| Osborne Clarke | £217m | 11% |
2023-24 results snapshot: top performers for PEP
| Firm | PEP | % growth |
|---|---|---|
| Charles Russell Speechlys | £661,000 | 30% |
| Macfarlanes | £2.6m | 24% |
| Allen & Overy (legacy) | £2.2m | 21% |
| Travers Smith | £1.3m | 18% |
| Stewarts | £1.42m | 16% |
| Shoosmiths | £781,000 | 16% |
| Ashurst | £1.34m | 14% |
| Taylor Wessing | £915,000 | 13% |