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Top 50 revenues set to edge down but City firms match 2008 fees

A substantial number of top 50 law firms will this year unveil falls in revenue despite many City practices maintaining fee income at 2008 levels.

Initial indications for the 2008-09 financial year are that a slight majority of firms will see falls in revenue – comprising the first fall in legal service demand in recent memory – while profits will fall by more than 10% in many cases.

However, a number of major City firms are on course to post broadly static revenues or modest increases, including Herbert Smith, Lovells, Simmons & Simmons and CMS Cameron McKenna. This group is, however, generally expecting falls in profitability.

Ashurst and Eversheds are set to report that turnover has dipped in the region of 5%-10%, while Norton Rose is also set for a marginal fall in revenue.

Eagerly-awaited results for the magic circle are less clear, although Slaughter and May, with turnover up around 5%, appears to be a strong performer. Linklaters and Freshfields Bruckhaus Deringer are believed to have posted roughly static fee income. Clifford Chance (CC) is externally tipped to see a fall of around 10%. However, a CC spokesperson said the firm had yet to finalise its results.

One partner at a top 10 City law firm said: “It is interesting how nobody has announced results by mid-May. To some extent I wonder if the magic circle firms are wary of announcing positive results after all the cuts they have made.”

General results – which are supported by 100 partner responses to a Legal Week poll (see below) – suggest revenue across the top 50 could be down as much as 5%. However, forecasts for profitability are far less clear as firms implement different approaches to deal with the costs of a string of restructurings that have swept the UK market since the autumn.

Firms will also still be deciding which financial year to incur these costs with some of them potentially being able to split them between last year and 2009-10.

Firms expected to see notable falls in profitability include CC and Eversheds, which are set for 15%-plus falls in average partner profits. Ashurst is also expecting a substantial fall in profits, in part related to a period of heavy investment, including its high-profile US launch.

One legal consultant commented: “This year there will be three major distortions: the cost of business restructuring, practice area activities and the leverage of foreign profits. It is not going to be pretty.”

Additional reporting by Sofia Lind, Claire Ruckin and Emma Sadowski.

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