Global financial performance


2018 global performance has been generally positive with Top 10 average fee income growing by 5% to an average of £980m. Profit growth is also impressive, in particular for Top 11-25 firms at 13%.

Growth in global fee income for Top 10 firms was driven by international offices with Western Europe and China contributing strongly.  Profitability of the international network remains challenging however, and for the most part, margins continue to lag behind the UK.

Read our 'at a glance' preview below for more on this section.

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At a glance

Global headcount

  • Top 10 firms have managed headcount whilst Top 11-25 firms have continued to invest.
  • Top 11-25 firms have now grown partner and fee earner headcount from 2016 to 2018 by 50% and 59% respectively. This is impacted by (i) consolidation in the mid-tier; and (ii) lateral hiring. In the same period, Top 10 firms reduced both partner and fee earner headcount by 2%.

Global fees

  • A number of firms achieved impressive global fee income growth; 38% of Top 25 firms recording double digit percentage growth. On average, Top 10 firms increased global fees by 5.2% (to an average of £980m), with 86% of growth coming from international offices. Top 11-25 firms achieved an 11.3% increase (to £250m). No global firm experienced a reduction in global fees. 
  • In terms of spread, 70% of Top 10 firms increased fees by 1–5%, whilst 30% grew fees by 11-15%. For Top 11-25 firms, 44% increased fees by 5-10% with the remainder equally spread across the 1-5%, 11-15%, 16-20% and 21-25% brackets.

Global profits

  • Top 10 firms grew global profits by 1.7% to an average of £388m, a rate significantly less than growth in fee income. Conversely, Top 11-25 firms grew global profits by 12.6% to an average of £87m, outstripping fee income growth of 11.3%.
  • Global net profit margin (before full and fixed share equity partner remuneration) has fallen for the second year running for Top 10 firms to 37.9% and this is principally due to a 0.7 percentage points increase in the fee earner staff cost ratio (to 26.5%), representing an additional average cost to firms of £6.9m (or £20k per full equity partner).
  • Top 11-25 firms grew global net profit margin by 1 percentage point to 34.3% following a reduction in the fee earner staff cost ratio by 0.3 percentage points to 28.2%, adding £750k to net profit (or £6k per partner).
  • The difference in global partnership models between Top 10 and 11-25 firms impacted the above, as the net profit margin difference grows to 10.4 percentage points (34.7% v 24.3%) when profit after fixed share equity partner remuneration is considered.

Movements in foreign exchange rates

  • Movements in foreign exchange rates have had limited impact on law firms in the current year. For Top 10 firms, fees fell by £1.3m (0.1% of total), whilst profits benefitted by £0.5m (0.1%). In the prior year, fees and profits benefitted by £43.7m (4.9%) and £16.2m (4.4%) respectively.
  • Foreign exchange movements have reduced fee income and profits in Top 11-25 firms by £1.9m (0.8%) and £0.6m (0.7%) respectively, compared to a benefit in prior year of £6.3m (3.2%) and £1.9m (2.8%).

International analysis

  • International net profit margins of Top 10 firms continue to lag behind UK performance by between 3.9 (Australia) and 25.9 percentage points (Africa). Top 11-25 firms’ UK margin performance is ahead of international counterparts by between 5.6 (Rest of Asia and Far East) and 24.5 percentage points (China – where the margin is only 4.3%).
  • Top 10 and 11-25 firms recorded growth in 1-5 years pqe average chargeable hours in all regions, except Western Europe for the Top 11-25. Top 10 firms’ chargeable hours for 1-5 years pqe is led by USA (1,675 hours) and Australia (1,524 hours) and both exceed the UK average (1,478 hours). Top 11-25 firms’ UK hours were 1,324, and the nearest international office is Australia at 1,242.

UK top tier vs US top tier

  • US top tier firms continue to significantly outperform the UK top tier in respect of all KPIs; for example, US top tier firms achieved an average PEP of £1,994k which is 41% (£818k) ahead of the UK top tier performance (£1,176k).
  • Average fee income and net profit in the US top tier grew by 6.8% and 8.0% respectively. This compares to 7.1% and 6.1% in UK top tier.
  • Only 25% of UK top tier firms achieved profit growth greater than fee income growth, whilst the corresponding figure for the US top tier is 43%.

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Kate Wolstenholme

Business Services Leader, PwC United Kingdom

Tel: +44 (0)7740 923078

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