US Firms Edging Out Magic Circle Law Firms in Global Market
Summary: UK law firms including those in the Magic Circle seem to be enjoying a better time than before. A PricewaterhouseCoopers LLP survey reported this October that the UK legal services market has bounced back to 2008 levels. Below all that glory, however, remain deep concerns over US law firms slowly but steadily dislodging the hold of the Magic Circle in Asia and Africa. Global operating and financial performance of Magic Circle firms against top-tier US law firms is dismal, and an internal salary war has started within the Magic Circle law firms to retain top performers, who keep defecting to US law firms in unprecedented numbers.
The news is out this week that things are back to 2008 market levels in UK for law firms according to the 2014 Annual Law Firm Survey by PricewaterhouseCoopers LLP. About 80 percent of the 250 law firms surveyed reported increased revenue and average profit per equity partner at the top 10 firms surpassed 1 million pounds for the first time since 2008. Law firms in UK are busy again.
However, another part of the same survey that focused on global operating and financial performance notes:
- US top tier firms have increased their net profit margin by 1 percentage points to 47% whilst the UK top tier achieved only 37% on an average
- UK top tier firms are 21.5% behind their US counterparts with respect to profit per partner hen it comes to full equity partners
- UK top tier firms are 20.5% behind their US counterparts when it comes to fees par partner, and
- UK top tier firms are 36.3% behind their US counterparts when it comes to profits per fee earner, irrespective of partner status
The Lawyer observers that there are at least 15 US law firms offering larger pay packets to juniors than what the magic circle provides. And The Lawyer debunks the myth of the claims of magic circle law firms that US law firms make their lawyers slog harder than their UK counterparts in another research survey. The survey conducted by the publication on 29 May 2014 found that at the junior level, over half of magic circle trainees reported working more than 56 hours a week, while in the case of US law firms, only 25 percent trainees said the same. And the result is that magic circle firms in UK have ultimately decided to start an internal salary war to stop US firms stealing top talent.
The top of the international market, for juniors, however, is still dominated by US law firms like Milbank, Tweed Hadley & McCloy, White & Case, Jones Day and Shearman & Sterling, when it comes to paying more than the magic circle.