Partners at the top 15 US law firms in London each generate an average of £1.23m in profit -  25% more than the £985,000 managed by their British counterparts, according to a new survey. This may partly be due to their avoidance of lower-margin work, says accountancy firm Hazlewoods, which conducted the research. 

In the past year, the top 15 biggest US law firms in the UK generated a total of £925m in profit, compared to £4.7bn for the top 15 UK law firms, according to Hazlewoods’ analysis of annual accounts.

Hazlewoods says the disparity in profit per partner may partly be attributable to US firms focusing on higher-margin M&A, private equity, corporate finance and banking work. They have often 'consciously avoided' offering service lines in lower-margin areas such as employment law, or outsourced this work to other firms. 

Ian Johnson, associate partner at Hazlewoods, said: 'US firms in London have become known for concentrating on what they see as the most profitable work – and that does seem to be working for them. It can however leave them more exposed to changeable market conditions such as a downturn in M&A and PE if markets get spooked by economic events like those we’ve been seeing over this past year.

'There are certain aspects of how US firms operate that all UK law firms could examine for possible lessons. Being a "full service" firm is appealing when trying to spread the risk of fluctuations in certain practice areas but is it the best model for everybody?’

Ian Johnson noted that US firms’ decision to offer the highest salaries in the London market to junior lawyers - in the £120k-to-£150k range - has not prevented them from being more profitable than their UK peers.

Late last year Christopher Saul, former senior partner at Slaughter and May, created a stir when he warned that the UK’s magic circle were at risk of becoming a 'training service' for the fast-expanding US firms operating in London. He suggested UK firms could boost profitability by emulating the big accountants and ‘spinning off’ less profitable practice areas or jurisdictional offices.

 

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