Business of Law Firms
Reappraising the UK Legal Market​

By Jake Rickman​

What do you need to know this week?

American-based legal industry publisher Law.com has published their first ever “UK Revenue Rankings”, which ranks according to revenue the top 30 law firms operating in London “irrespective of where the firm is headquartered.”

Below is Law.com’s first-ever Top 30 by UK Revenue:

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When analysing the data, a few points about Law.com’s methodology:
  • Law.com only considers the revenues generated in the UK (i.e., it does not matter what Latham & Watkins’ US operations are doing).
  • Revenue figures for UK firms are based on accounts ending April 2022, whereas US and Asian firms are based on accounts ending December 2022 (this means the revenue figures are not like-for-like and therefore comparisons should be taken with a grain of salt).
  • When determining where any given law firm is headquartered, Law.com looks at which country the firm has the greatest number of lawyers by headcount. (For most firms, it is obvious where they are based, but Ashurst is listed as an Australian firm and Dentons as a Chinese firm on this methodological basis).
Why is this important for your interviews?

One of the most challenging things about familiarising yourself with the legal industry as an applicant is getting a “big-picture perspective” on the industry. This means understanding questions like:
  • Who really are the biggest firms? And big in what sense? Profitability? Revenue? Headcount?
  • What trends and themes are driving changes to these figures?
  • What does this say about the challenges facing the legal profession in London and the UK?
To understand the last two questions, it helps to have the data to hand, which allows you to answer the first question. (Complicating things is that much of this data is walled off behind paywalls and the like).

In any event, Law.com’s figures demonstrate that UK firms barely make up more than half of the top 30. This is consistent with what we have seen over the past fifteen years of US firms gradually encroaching upon the UK market share. Still, the top five firms — what some still call the Magic Circle — remain solidly in the lead ahead of even international behemoths Latham & Watkins and Kirkland & Ellis (though which together account for 10% of the total revenue generated by the Top 30 alone!)

Likewise, UK firms make up 60% of the total revenue (62% if you count Ashurst as a UK firm). And among the top 15, this figure is slightly higher at 65%. This suggests that while the US encroachment into London has been substantial, it is not totalising.

However, where the US firms really seem to be making inroads is in the bottom half of the Top 30. Of the $3.8bn in revenue in this segment, UK firms account for less than 40% (when counting Ashurst as an Australian firm). As a consequence, UK mainstays like Travers Smith have fallen out of the Top 30, as they struggle to stay competitive in markets like private capital, which is where the American firms excel.

In terms of future trends, one wonders if the Allen & Overy/Shearman & Sterling merger will be a sign of things to come, as US firms enter into tie-ups with midsize UK firms (and vice-versa) in an effort to consolidate market shares and stay competitive.

Alternatively, we may see certain UK firms more solidly entrench themselves in niche markets, which has been Clyde & Co’s approach: to double down on its reputation as an insurance firm powerhouse and wall off the UK insurance market from US competitors.