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Not such a magic circle?

Posted by: Laurence Simons 23/07/14

The magic circle may have had a huge slice of the UK legal market in the last few years, but, unlike in some other sectors, it appears their dominance could be slipping.

According to the Lawyer, while the top ten members of the UK200 (apart from habitual non-disclosers Slaughter & May) have seen revenues more than double to £10 billion in the last decade, with the Magic Circle accounting for just under half of that income.

However, with global consolidation taking place, the sands appear to be shifting and the likes of Linklaters, Allen & Overy, Clifford Chance and Freshfields Bruckhaus Deringer are being challenged by rising firms that have sought to tap into growing markets around the world, taking advantage of the hottest prospects while the cold wind of recession blew through the world's leading established economies.

This has led to companies like DLA Piper, Herbert Smith Freehills and Hogan Lovells closing the gap. A series of mergers - such as that between Lovells and Hogan & Hartson - has increased the strength of some of these firms.

The journal noted that this latter trend has greatly increased the prospects for merged US firms to break into the UK market. Writing only last week in the same journal, Mark Brandon of Motive Legal said: "The US is the biggest market for legal services in the world and if you can't offer world-class service there your days are numbered.

"It is not an impossible ask, but you'd better get it right, and soon. I'll see at least two of the four merged or fading into rosy irrelevance before I retire." 

Whether named Rosie or not, lawyers working for larger firms - or seeking to in due course - may be seeing market change themselves. Certainly if Mr Brandon is right the levels of competition for good client service are set to soar, which could in turn mean this becomes a key aptitude required of candidates to join the top law firms.

Either way, DLA Piper is not the largest UK legal firm, with turnover in 2013-14 of £1,566 million, compared with second placed Clifford Chance on £1,359 million. The respective rises in turnover for the two companies have been 386 per cent and 48.7 per cent. Indeed, the largest rise in turnover during this period among the big four has been 84.7 per cent at Allen & Overy, compared with 449 per cent for the fastest-growing challenger, Norton Rose Fulbright. 

Good service was certainly a factor for DLA Piper's success with National Grid, for which it received an award earlier this month for the Best Property Strategy Implementation, regarding the acquisition of a site at Lostock Hall in Preston. This included talks with Lancashire County Council and the Homes and Communities Agency, as well as the acquisition of land on which to build a road to provide access to the site, where a number of homes will be built.

The award may not quite have got people dancing in the streets like the kind of trophy German footballers win, but it may offer a further sign that some law firms are themselves gaining the rewards for a pursuit of excellence.