Partners in Clifford Chance, the world’s largest law firm, have suffered an average 16 per cent drop in their profits, hit by the dearth of corporate activity, the relative weakness of the dollar and two expensive office moves.
The currency and property difficulties exacerbated the dip in global turnover to £950m from £972m in 2002-2003, squeezing partner earnings to their lowest level for years.
Clifford Chance partners have taken the biggest earnings cut in the five top law firms, although rivals have also seen profits fall.
Clifford Chance’s average profits per partner were £558,000, down 16.3 per cent from £638,000 the previous year.
Partners in the highest pay bracket, a large majority, saw earnings of about £630,000, a cut of about £100,000.
The firm’s extensive US operations, which have expanded since the 2000 merger with New York’s Rogers & Wells and which provide more than 20 per cent of revenues, mean it is more exposed to the dollar than its UK-based rivals.
The firm has also recently moved its London headquarters to a new office block in the Docklands, and is about to move its New York base.
Other leading firms have also had a lacklustre year with turnover largely static. Linklaters’ average profits per partner were about £670,000, down about 8.7 per cent from £734,000, on turnover of £720m.
The highest earning partners pocketed about £840,000, down from £905,000.
Freshfields Bruckhaus Deringer is understood to be finalising figures that will show a 5 per cent drop in profits from £700,000 to £665,000 and static turnover of £800m.
Allen & Overy is expected to record average profits per partner of £648,000, a 4 per cent decline.
Stuart Popham, Clifford Chance’s senior partner, said the dollar exchange rate was 15 per cent lower than the figure used to convert dollar earnings last year. “We would have needed a 15 per cent rise in US earnings to stand still.” There was also the cost of moving offices and a large IT outlay, while clients were bargaining harder than ever over fees.
However, the last quarter of the financial year had seen a notable upturn in business in the UK and Europe. He said: “The figures are not as good as we would want, but we are looking forward to a better year next year.”
The firm has also embarked on an aggressive costs review. It has not replaced some departing administrative, support and legal staff, which is understood to have cut the headcount by about 4 per cent.