- US law firm partners generate £1.23m in profit per partner, compared to £985k for UK firm partners
- US firms benefiting from their focus on higher margin M&A and PE work
Partners at the Top 15 US law firms in London each generate an average of £1.23m in profit, 25% more than the average £985k of their counterparts at the Top 15 UK law firms*.
US law firms with offices in London have become an increasingly important part of the UK legal market since they first started to make a mark in the UK more than three decades ago.
Their profitability may partly be down to their more rigorous focus on the higher-margin work in the industry – primarily M&A, private equity, corporate finance and banking work
As part of this strategy US law firms have often consciously avoided offering service lines in areas that can be lower margin such as employment law. Where such work has been essential as part of M&A or PE work, they have often outsourced it to other firms.
Ian Johnson, Associate Partner, says that, although there are obvious exceptions, UK firms do not always focus on fewer lines of higher margin work.
In the past year, the top 15 biggest US law firms in the UK generated a total of £925m in profit, compared to £4.7bn for the top 15 UK law firms.
Says Ian Johnson, “US firms in London have become known for concentrating on what they see as the most profitable work – and that does seem to be working for them. It can however leave them more exposed to changeable market conditions such as a downturn in M&A and PE if markets get spooked by economic events like those we’ve been seeing over this past year.”
“There are certain aspects of how US firms operate that all UK law firms could examine for possible lessons. Being a ‘full service’ firm is appealing when trying to spread the risk of fluctuations in certain practice areas but is it the best model for everybody?”
Ian Johnson says that US firms’ decision to offer the highest salaries in the London market to junior lawyers has not prevented them from being more profitable than their UK peers.
US law firms with a presence in London often offer newly qualified solicitors’ salaries within the £120,000-£150,000 range**, whilst major London commercial law firms struggle to keep pace, often offering starting salaries of around £100,000.
Adds Ian Johnson: “Being able to attract the most outstanding young talent is a key part of US firms’ strategy in London and, while those firms are able to deliver such impressive profitability, we don’t see how that will change any time soon.”
* Analysis of law firms accounts by Hazlewoods
** Dartmouth Partners Recruitment Agency, 2021
