UK Law Firms Struggle to Compete with American Law Firms

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Summary: A study from Legal Week shows that American law firms’ PEP has grown more than UK law firms’ PEP in the last five years. 

New research shows that UK law firms are lagging behind the US when it comes to increased profit per equity partner (PEP). According to Law.com, PEP is a popular way to compare the success of different markets, and some in the legal industry have expressed their surprise that the contrast between the two has been so significant.

  

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“I would have expected that the US-based firms would be ahead, but not this significantly,” White & Case London head Oliver Brettle told Law.com. “My expectation is that the US firms’ growth is linked to the very strong performance of the US economy and the strong performance of US-headquartered corporates and financial institutions, enabling US firms to follow them as they expand and invest globally. Where are the UK equivalents of Google, Apple and Facebook?”

The PEP data was released by Legal Week, which stated that the top 10 American law firms grew at a rate of 50% more than their UK rivals over the past five years. The top 10 UK firms’ PEP increased an average of 15.7% during the past five years while the top 10 US firms’ PEP increased by 24.7%.

According to Law.com, the disparity amongst the top 20 firms in both markets is also stark. It is noted that Legal Week did not count DLA Piper, Norton Rose Fulbright and Hogan Lovells because those firms have big presences in the US and the UK.

“Across this group of 20 US firms, PEP increased by an average of 25.2% between 2011-12 and 2016-17, compared with less than 12% at the equivalent largest UK firms,” Law.com stated. Nine US firms saw their PEP increase by over 30% in the past five years while only three UK firms could boast those numbers.

The nine US firms were Paul Weiss Rifkind Wharton & Garrison, White & Case, Latham & Watkins, Kirkland & Ellis, Sidley Austin, Gibson Dunn & Crutcher, Simpson Thacher & Bartlett, Ropes & Gray and Skadden Arps Slate Meagher & Flom. The three UK firms were Allen & Overy, Pinsent Masons and Slaughter and May.

With large contrasts of PEP growth among US law firms and UK law firms, law firm managers in the UK realize that they must take action to make themselves more appealing to talent.

“If commentators are correct that 48% of global legal spend is in the US and 12% is in the UK, then it stands to reason that if you do not have a strong US practice, you will find it more difficult,” Brettle added. “The findings put UK firms at a further disadvantage when it comes to hiring and retaining talent, given this is before converting these figures to dollars and making the difference look even more stark. A lot of this is about talent – investing and keeping people because you can afford to do so.”

Source: Law.com

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