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New research from Legal Week highlights the mountain that UK firms need to climb in order to compete for talent in a global marketplace, with partner profits at the top 10 US firms growing by roughly 50% more than their equivalent UK rivals over the last five years.

Data from Legal Week‘s UK Top 50 and The American Lawyer‘s Global 100 rankings shows that the 10 largest UK firms by revenue have increased profit per equity partner (PEP) by an average of 15.7% during the last five years, compared with 24.7% across the 10 largest US firms.

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Georgina Stanley

Georgina Stanley is the editor of Legal Week. She joined the magazine in October 2005 and has since written news, analysis and commentary about a range of leading UK and international commercial law firms, as well as trends in the profession. Before joining Legal Week she worked at several business titles, starting her journalism career at Euromoney.

Law Firms Mentioned

<a href="http://www.almcms.com/contrib

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

/uploads/sites/378/2017/03/money-city-globe-Article-201703261625-min.jpg"><img class="aligncenter size-full wp-image-59704" src="http://www.almcms.com/contrib

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

/uploads/sites/378/2017/03/money-city-globe-Article-201703261625-min.jpg" alt="" width="616" height="372" /></a>New research from <em>Legal Week</em>��has highlighted the mountain that UK firms need to climb in order to compete for talent in a global marketplace, with��partner profit growth at US firms��outpacing their UK rivals by 2:1 over the last five years. The research highlights a widening gap in profit growth between the market leaders on��each side of the pond, with the 20 largest US firms seeing profit per equity partner (PEP) climb by��more than twice as much as their UK counterparts since 2012. Data from <em>Legal Week</em>���s <a href="http://www.legalweek.com/sites/legalweek/2017/10/09/uk-top-50-2016-17-analysis-views-from-the-market-and-a-full-run-down-of-the-countrys-largest-firms/">UK Top 50 rankings</a> and <em>The American Lawyer</em>���s <a href="http://www.legalweek.com/sites/legalweek/2017/09/25/the-global-100-2017-worlds-largest-law-firms-see-profits-plateau-as-growth-continues-to-slow/">Global 100</a>��show that while the 20 largest US firms grew PEP by an average of 25.5% between 2011-12 and 2016-17, the UK's top 20 achieved an average increase of just under 12%. (The figures��disregard transatlantic players DLA Piper, Norton Rose Fulbright and Hogan Lovells, which are classed as UK firms by <em>Legal Week</em> and US firms by <em>The American Lawyer</em>.) At the 20 largest US firms by revenue, PEP climbed by an average of 25.2%, compared with a average increase��of just 11.7% at their UK counterparts. <a href="http://www.almcms.com/contrib

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

/uploads/sites/378/2017/10/Profit-growth-US.jpg"><img class="aligncenter size-full wp-image-68872" src="http://www.almcms.com/contrib

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

/uploads/sites/378/2017/10/Profit-growth-US.jpg" alt="" width="616" height="600" /></a> Nine��of the 20 largest US law firms��have seen��PEP climb by more than 30% over the past five years - Paul Weiss Rifkind Wharton &amp; Garrison, White &amp; Case, Latham &amp; Watkins, Kirkland &amp; Ellis, Sidley Austin, Gibson Dunn &amp; Crutcher, Simpson Thacher &amp; Bartlett, Ropes &amp; Gray and Skadden Arps Slate Meagher &amp; Flom. In contrast, only three of the��20 largest UK firms have achieved five-year PEP growth of at least 30% - Allen &amp; Overy,��Pinsent Masons and Slaughter and May (with the added proviso that Slaughters does not disclose PEP and therefore��its performance��is estimated.) While the difference in average PEP growth across the 10 largest firms in each market may be smaller than that across the 20 largest firms, it is no less significant, given that the already higher base PEP figures at these firms means even a smaller percentage increase pushes the actual PEP figure further out of the reach of UK firms. Hence A&amp;O���s 37% increase in average PEP took the metric from ����1.1m to ��1.5m, a difference of ��400,000 (��527,000), while Latham &amp; Watkins��� 34.8% hike took PEP from $2.27m to $3.06m ��� a difference of $790,000 (��600,000). Within the UK top 10 average growth was brought down by Herbert Smith Freehills and Ashurst, both of which have completed Australian mergers during the last five years and both of which have lower PEP now than their legacy UK side did five years ago. In contrast Morgan Lewis &amp; Bockius is the only top 10 US firm to report lower PEP for the 2016 calendar year than in 2011 and this decrease has come alongside a significant hike in equity partner numbers over the period after the firm took on teams from defunct firms Dewey &amp; LeBoeuf and Bingham McCutchen. <a href="http://www.almcms.com/contrib

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

/uploads/sites/378/2017/10/Profit-growth-UK.jpg"><img class="aligncenter size-full wp-image-68881" src="http://www.almcms.com/contrib

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

/uploads/sites/378/2017/10/Profit-growth-UK.jpg" alt="" width="616" height="600" /></a>Revenue growth across the top 20 UK firms outpaced that across their Stateside rivals at 48% rather than 30%, however much of this growth was driven by mergers, with Ashurst, HSF, Clydes and legacy Wragge &amp; Co among those bolting on firms. While many argue that average PEP is not the best measure of law firm profitability or success it��remains the most widely used comparator within the market.�� Many leading UK firms, including most of the magic circle, have overhauled their lockstep systems in recent years to create more flexibility at the top end in order to better recruit and retain star performers in the face of US advances. As highlighted by Legal Week's research though they the underlying growth in profitability in US firms means they will have to step up this fight in order to remain competitive. &nbsp; &nbsp; <

  • Ashurst
  • Bingham McCutchen
  • DLA Piper
  • Gibson Dunn Crutcher
  • Herbert Smith Freehills LLP
  • Hogan Lovells
  • Morgan Lewis Bockius
  • Norton Rose Fulbright
  • Paul Weiss Rifkind
  • Sidley Austin
  • Simpson Thacher Bartlett
  • Skadden, Arps, Slate, Meagher & Flom LLP
  • Slaughter May

> Knitter: Too few entities/relations are generated compared to number of concepts (only 98% (82/83) concepts are converted).
 

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