Editors Comment: The going gets...
If caginess among the magic circle about their financial performance was the sole measure of how bad things had got, then the UK market would be in deep, deep trouble. Certainly, London's top firms are doing everything in their power to keep their H1 performance under wraps. However, this probably has more to do with abject fear that they have been trounced in relative terms by one of their peers rather than proof that it has been a punishing six months for London's finest.For bolder souls among the top 50 the picture is, to be honest, boringly predictable. Revenue growth has slowed drastically against the first half of last year, when it was a mark of shame to not have increased your turnover by double-digits. This year making 10% growth is seen as standout, so a pat on the back is due Norton Rose, Lovells and CMS Cameron McKenna for getting into that ballpark. Actually, considering the dramatic shifts in the market this year, and that the first half of 2007-08 was the last hurray of the boom, anyone getting above 5% H1 growth has put in a credible performance, especially Ashurst, whose practice is particularly exposed to the turn in the markets. This also suggests that recent revival of the fortunes of the band of firms below the magic circle is built on something more substantive than merely benefiting from run-off work that the elite firms can't take on in a boom.There is a common thread between the magic circle and the aspiring practices just below: both groups have become a lot better at cost control since the dotcom slump. There wasn't much fat on these firms even during the last boom, and they've moved pretty quickly to cut back costs as the crunch hit. By contrast, a lack of discipline is one reason why domestically-focused practices have been the weaker performers so far. But if the current figures prove that most firms could live with the crunch, that doesn't yet give a concrete reading of how they'll cope with the coming recession. The central projection for the top 50 in 2008-09 has to be for revenue to be roughly static, while profits fall back 5%-10%. If the deal market doesn't reach some kind of a floor at the start of 2009 as the credit market begins to ease and the effect of what will be the most dramatic loosening of monetary conditions for 15 years takes hold, it will be a lot worse than that. And even assuming that the floor is reached in the New Year, 2009-10 is going to be worse. But so far the profession has acquitted itself reasonably well in the firstname.lastname@example.org
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