One of the consequences of a stockmarket listing is that there is limited scope to puff your performance. External investors demand transparency. The more astute of their number will regard any public relations flannel published alongside the numbers as so much verbiage.
Professional services firms that remain partnerships have always done things differently. When times are good – and often even when they are not – they will often release an achingly dull and clichéd boilerplate statement from the senior partner that doesn’t say much at all. And this is quite deliberate. Why would s/he voluntarily disclose anything of substance? It’s the partners’ business alone and nosey journalists can butt out.
I was, therefore, gratified to see quoted commercial outfit Gateley explicitly acknowledge what is becoming obvious as the 2020/21 top 100 results season gets into full swing. Covid-19 has been a boon to the major law firms, distasteful though that statement may appear. A glut of work happily coincided with a big reduction in overheads as staff assumed the costs of running their own offices. There has yet to appear a single ‘down’ arrow on the Gazette’s live 2020/21 financials rankings.
Clifford Chance and Allen & Overy have posted big rises in average profit per equity partner, to £1.9m. And look at those margins. Nearly one pound in every two generated by A&O is taken straight to the bottom line. Tesco’s net profit margin, for the sake of idle comparison, is just over 1%.
A magic circle partner was once quoted as saying there was no reason why top City partners should not earn as much as Premier League footballers – they are, after all, the best of the best. Well – now they do. The average premier league wage is also reckoned to be about £36,000 a week.
There was a time when partners at the big six/five/four accountancy firms made more than their legal counterparts, but they are long gone. PEP at A&O has surged by £700,000 in just five years, while partners at Clifford Chance have seen a £620,000 rise since 2016. So much for the deleterious impact of Brexit. And no wonder the City giants are blasé about throwing money at NQs.