UK and US law firms make pole positions count

London: The top law firms by revenue in the UK and US have outperformed and stretched their lead over second-tier rivals, according to new research, largely on the back of the record year for mergers and acquisitions.

While revenue and profit growth at the largest UK law firms has been modest since the financial crisis, those that had the most success this year capitalised by raising their billing rates, according to research by Deloitte. The UK’s top 10 firms were able to increase average fee income by more than 6 per cent in the fiscal year to October 31, compared to 2 per cent by firms ranked 11 to 25, it said.

Any growth for firms outside the top 10 largely came by an increase in headcount, said Jeremy Black, professional services partner at Deloitte in London.

While total billable hours among UK law firms was “broadly in line” with the same quarter a year earlier, the largest were able to raise prices in areas where they were busiest, Black said. They have also developed a better understanding of how to price work taken on at a fixed cost, which became popular after the financial crisis.

They were “more confident in pricing in a robust way” with “an increased focus on pricing and profitability driving growth”, said Black.

In the US, firms with specialist reputations have pulled further ahead while some of those in the middle have suffered a decline, according to research by Citi Private Bank’s law firm group and Hildebrandt Consulting.

The most successful firms in the “hyper-competitive” US market were those that were able to market themselves as part of the top-tier. “When we look at the top end of the market, those firms have been very good at establishing a brand in only a handful of practice areas,” said Gretta Rusanow, head of advisory services in Citi’s law firm group. When clients wanted advice, “they’ve already decided they want the best in that area”.

“The firms that find themselves in that middle area, where the clients find it difficult to tell them apart, they’re looking at ways to differentiate themselves,” she added.

Work on deals was the busiest area for top firms, both in the US and UK, while litigation saw a marked slowdown. Property and regulatory work remained steady.

Meanwhile, US firms with London offices have made inroads in the UK market, enjoying a 29 per cent increase in hours worked from 2010 to 2014, according to Citi, with 16 per cent of that rise coming in 2014. That progress, while uneven among US firms with a London presence, made it less likely they would merge with local firms.

UK firms trying to enter the US market have had a harder time, Citi found.

— Financial Times