Average profits for the top 50 firms fell for the second year running according to Legal Week magazine, with profits down 1.1 per cent on the previous year and fee income up by 5.1 per cent. Why, at Clifford Chance, profits are barely £639,000 per partner.

Average profits at the top 50 firms fell for the second year running, depressed by the lack of corporate mergers and acquisitions and the slowdown in capital market activity.

That compares with fee growth at the top 50 firms of 8.6 per cent in 2001-02 and 21 per cent in 2000-01. Profits were down 0.9 per cent in 2001-02 but saw a growth of 18 per cent the year before.

The results mark an end to five years of strong income growth and expansion at the top-tier firms. They also suggest that corporations may have taken advantage of the difficult conditions to negotiate lower rates and push down their legal bills.

The so-called “magic circle” of five leading firms – Clifford Chance, Freshfields Bruckhaus Deringer, Allen & Overy, Slaughter and May, and Linklaters – managed to push fee income up 7 per cent, but collectively their profits were down 1.6 per cent, according to the magazine’s figures.

Because few law firms, as partnerships, report their financial results officially, the figures compiled by trade publications are always closely watched as an indicator of the sector’s financial health.

Clifford Chance – the world’s biggest law firm, which has pursued international expansion and is in the process of moving to spacious new headquarters in London’s Docklands – saw the biggest drop with profits down 10.5 per cent.

Clifford Chance still enjoyed average profits of £639,000 per partner. Slaughter and May, traditionally the most profitable firm, increased profits by 3 per cent to £927,000 per partner.

Separate figures from The Lawyer, a rival trade journal, this week showed the most senior partners at both Slaughter and May and Allen & Overy pocketing more than £1m last year.

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