Magic circle firm Clifford Chance today reported a sharp fall in profit per equity partner (PEP) on top of declining revenues.

PEP for the year to 30 April 2009 was down 37% on 2007/08, falling from £1.15m to £733,000. Revenues fell 5%, from £1.33bn in 2008 to £1.26bn this year.

Clifford Chance was the largest law firm in the world by revenues last year, but if fellow magic circle firm Linklaters reports stable revenues this year, Clifford Chance will fall to second place.

Childs gave warning early in June that Clifford Chance’s revenues and profits had been hit.

Childs said: ‘Given the scale of the financial crisis and the severity of the economic downturn, last year was very challenging for our clients and therefore for us.

‘However, we continued to make real progress against our long-term strategy, taking significant steps to widen our presence and deepen our offering in a number of important areas, including the crucial growth markets in Asia and the Middle East.’ The firm recently opened an office in Abu Dhabi and entered into a ‘best friends’ relationship with Indian firm AZB.

‘We have also taken a number of other decisions that were difficult but necessary for the firm's future, including redundancies and an in-depth review of the firm's overall partnership structure,’ said Childs. ‘This action, alongside our investments, will ensure we are well positioned to take the firm forward and to pursue our strategy of leading the international legal elite.’

Clifford Chance’s decline in profits and revenues came despite a more favourable dollar exchange rate in 2008/09. The firm’s 2008 dollar revenues were $2.67bn, equating to £1.33bn at an average exchange rate of $2.01 per £1 for 2007/08. The firm’s 2009 dollar revenues were $2.12bn, equating to £1.26bn at an average exchange rate of $1.68 for 2008/09.