UK firms: not as global as you think

This year The Lawyer’s Global Growth Index – a new part of The Lawyer UK 200 – tracks overseas revenues at UK-led law firms, and their office openings. Have five years of global expansion altered the revenue profiles of the top UK law firms, and what’s the return on investment?

What did we find? First, that the distribution of overseas revenues is concentrated in very few hands – 10 firms dominate. Second, that globalisation in UK legal industry terms is misleading. There are two ‘globes’, not one: the eastern and western hemispheres. The magic circle’s American travails are well-documented, and the response by many firms to global pressures is to create a Commonwealth business with a presence in any or all of the following: Australia, Canada, Hong Kong, Singapore and South Africa. Ashurst, Herbert Smith, Norton Rose, Holman Fenwick Willan, Pinsent Masons, Wragges, and Withers have taken this route. It has also appealed to Allen & Overy and Linklaters (through associations).

The UK firms have always followed traditional clients in the trade routes of old, from South Asia to the Middle East. But despite the attraction of English law and London as an international litigation centre, the dollar is king. As pitch teams at law firms increasingly map jurisdictional coverage onto client presence they can see where the hole is: the US. CMS and Eversheds are both seeking deals; last week, Pinsents senior partner Richard Foley predicted that his firm would probably have tied up with a US outfit in five years. Enormous credit, then, to Clyde & Co, which is the most international of all UK law firms outside the magic circle, and also to Withers, which has quietly globalised itself in the US and Asia. But both Clyde & Co and Withers can operate successfully through a global specialisation, which is not a route available to all. If you want to see how to execute a grand idea look at the Hogan Lovells transatlantic deal. An analysis of that data shows that the merger made it an elite challenger on revenues and PEP; my money’s on a revitalised Herbert Smith Freehills to do something really interesting.

It’s when you look at our data that you see the scale of the challenge outside the top 10. After Ashurst, at £359m, there is a 51 per cent drop to Bird & Bird at £176m. For another UK-led law firm to overtake Ashurst it would need to add around £200m in non-UK revenues – and that’s not going to happen without a major transatlantic combination. And no, Wragge Lawrence Graham, in this context Canada doesn’t count.

It’s easy to get blindsided by the fact that London is the world’s most internationalised legal centre. As our UK Market Register – our list of UK-derived revenues – shows, you can make a good living with domestic earnings. International expansion doesn’t guarantee high-profit return (see Bird & Bird), but staying at home doesn’t make you Macfarlanes either.

Timidity, begone. Be bloody, bold and resolute.