Big Four London Law Firms' Profits Rise as Brexit Approaches

(Bloomberg) -- London’s biggest law firms have posted rises in profits this year and say they are prepared for Brexit due to their international structure and cross-border work.

The big four “magic circle” firms make a large proportion of their revenues outside the U.K. and Europe and say that Brexit won’t significantly change their business plans.

Freshfields and Clifford Chance posted profit increases of 12 percent or more, with Freshfields’ net income rising to 683 million pounds ($904 million), and Clifford Chance partnership profit rising to 626 million pounds. At Allen & Overy, profit growth slowed to 3 percent after a record last year, in part due to a stronger pound, while at Linklaters profit held steady at 676 million pounds. Revenues at all four firms stood at around 1.5 billion pounds.

While last year the low pound after the Brexit referendum boosted law firms’ profits, which are reported in sterling, this year’s profits were pushed up by fees from advising on mergers and acquisitions and more global financial investment work.

“At this stage it looks reasonably encouraging, but there are plenty of dark clouds, whether that is Brexit, trade wars, emerging market debt, or China slowing down,” said Tony Williams at legal consultancy Jomati.

Brexit Uncertainty

While uncertainty around Brexit has been a concern, law firms have also been benefiting from companies, fund managers and big institutions keen to get advice on preparing for the U.K. leaving the EU. Clifford Chance’s Matthew Layton said that Brexit was generating work for the firm both in London and in the rest of Europe. “Clients are putting plans in place. In the short term many of our clients are facing uncertainty and complexity.”

Layton said Clifford Chance was developing its practices in Amsterdam, Paris and Frankfurt in terms of regulation, but wasn’t expecting a major shift on work in London. All four firms have offices across Europe. Many lawyers have registered in Ireland since 2016 to make sure they can represent clients in EU courts after Brexit and Paris and Frankfurt are trying to lure cases to their own courts.

Still, Linklaters’ managing partner Gideon Moore said that Brexit wasn’t making the firm a huge amount of money. “From my perspective I would rather we were able to know what the post-Brexit landscape looks like.”

M&A Boom

Revenues at the elite London firms have historically been driven by deal work, and record merger and acquisitions activity has boosted profits this year. “The M&A practice has been fueled by the biggest boom in M&A for a generation. Cheap money is driving it,” said Andrew Ballheimer, managing partner at Allen & Overy.

Freshfields had the highest share of the market for advising on mergers and acquisitions among the U.K. firms with 5.5 percent of the market, according to data compiled by Bloomberg, but was well behind U.S. firms like Sullivan and Cromwell, which had the highest market share on advising deals with 10 percent.

Linklaters’ Gideon Moore said the firm had advised on big deals but was cautious on the outlook for M&A revenues next year, saying “every day you are in an uptick means you’re a day closer to coming down.”


Tech and data was a growth area in terms of risk management and compliance for all the law firms. Matthew Layton at Clifford Chance said that data protection legislation, cyber risk, and trade law touched every single aspect of his business. “The traditional areas are being broken down as clients need us to look at all legal areas,” Layton said.

Digital transformation projects and revenues were also driven across practice areas by work related to new data regulation from the European Union, which brought in its General Data Protection Regulation on May 25. “GDPR was the equivalent of a lawyers full employment act for 3-4 months” said Jomati’s Tony Williams.

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