July 6 (Reuters) - Two of the largest law firms in the
United Kingdom are reporting flat-to-lower annual revenue
growth, reflecting the reach of Europe's economic woes.
Linklaters and Freshfields Bruckhaus Deringer released
financial results Friday showing stagnant revenue gains and
declines in profits per partner for the fiscal year ending in
"The more mature European markets have been pretty terrible
this year," said Tony Williams, a former managing partner of
Clifford Chance who is now with Jomati Consulting.
The annual results are some of the weakest to emerge this
week from the UK's Magic Circle, a label applied to a small but
influential group of London-based law firms. But on Tuesday two
other Magic Circle firms, Clifford Chance and Allen & Overy,
reported stronger financial results.
All four rank among the 10 largest law firms by revenue in
the world, according to an annual list compiled by The American
Freshfields is the product of a 2000 merger between a London
firm and two German firms, Deringer Tessin Herrmann & Sedemund
and Bruckhaus Westrick Heller Lober. The firm said it grossed
nearly £1.14 billion ($1.77 billion), down 0.7 percent. Profits
per partner declined 1 percent, to £1.31 million ($2.03
In a statement, Freshfields managing partner Ted Burke
described 2011 as "a good year" for the firm, "especially when
you consider the impact of the sovereign debt crises on
Linklaters, meanwhile, said that its revenue grew just 0.6
percent, to £1.21 billion ($1.87 billion). Profits per partner
fell 3 percent, to £1.18 million ($1.83 million). In a
statement, Linklaters managing partner Simon Davies nodded to
the challenging economic climate.
Law firm consultants predicted a tough road ahead. The
crisis in the euro zone coupled with the double-dip recession in
the UK have cast a cloud over how British law firms will be able
to do better next year, Williams said.
Though the 100 largest firms in the UK are expected to
report a 6.6 percent annual increase in revenue, according to a
survey by Deloitte released in June, at least some of that
growth is attributable to mergers, said Jeremy Black, a partner
in Deloitte's professional services group. He also said that law
firm revenue growth has been slowing since July 2011.
"The firms are finding that the corporate work is quiet,"
Black said. "There just aren't the number of corporate
transactions one would typically see or want to see."
The two Magic Circle firms that have posted significant
revenue growth for last year, Allen & Overy and Clifford Chance,
were aggressively expanding into new markets in 2011. They
launched new offices in cities like Casablanca and Istanbul,
while also making major lawyer acquisitions to open outposts in
"Typically, the European firms have a more global footprint
than the American firms," Wim Dejonghe, Allen & Overy's managing
partner, said in an interview. "The domestic markets are smaller
than the American market is, so European firms that want to see
revenue growth need to go abroad."
Allen & Overy's revenue climbed 6 percent, to £1.18 billion
($1.92 million). Of that, 22 percent came from emerging markets,
up from 15 percent three years ago, Dejonghe said. The firm is
continuing to expand overseas, announcing in May it planned to
open two offices in Vietnam.
Overall profits at Allen & Overy grew 7 percent. Profits per
partner were flat, at £1.1 million ($1.8 million), thanks in
part to the firm adding another 29 partners.
Clifford Chance posted the biggest gains, with revenues up 7
percent, to £1.3 billion ($2.05 billion), and profits per
partner up 7 percent, to £1.1 million ($1.7 million).
Clifford Chance executives attributed some of the firm's
growth to its presence in markets other than Europe,
particularly Asia, where revenues climbed 28 percent and
contributed to 14 percent of the firm's overall revenues.
But with more than a third of its revenues coming from
Continental Europe, Clifford Chance management said it is
mindful of issues in the euro zone.
David Childs, the managing partner of Clifford Chance, said
during a conference call with reporters Tuesday that he expects
a challenging year ahead, but was hopeful a European Union
summit agreement reached June 29 would help bring down borrowing
costs for Spain and Italy.
"It looks like market conditions will be tough this year, or
at best uneven," Childs said.
(Reporting By Nate Raymond)
Follow us on Twitter @ReutersLegal | Like us on Facebook