Magic circle profits hit by Covid uncertainty

Three magic circle firms have reported a dip in profits this results season, as provisions are made for the ‘ongoing and unpredictable’ consequences of Covid-19.

Freshfields, Allen & Overy and Linklaters have all announced a year-on-year fall in profits for the year ending 30 April 2020, in spite of robust revenue growth.

Freshfields disclosed net profit of £685m, down from £688m in 2019. Meanwhile, profit per equity partner (PEP) fell from £1.84m to £1.82m. Revenue grew by 3%, however, to £1.52bn.

Meanwhile, pre-tax profits at Linklaters dipped by 3% to £726.9m, and PEP fell by over 5% to £1.61m. Revenue was up 0.7% at £1.64bn.

At Allen & Overy, profit before tax was down 2.5% compared with last year’s £690m, and PEP fell by 1.7% to £1.63m. The firm said profit before tax remained flat, excluding provisions for uncertainty caused by Covid-19.

Clifford Chance bucked the trend, however, announcing its strongest set of financial results to date. Figures showed a 5% increase in partnership profit – which stands at £666m – and a 6% rise in revenue, from £1.69bn to £1.8bn. Profit per equity partner grew by 5% year on year to £1.69m.

Given the ‘ongoing and unpredictable’ consequences of the pandemic in the final quarter, Clifford Chance said it has taken a provision against the profits distributable to partners, meaning some money was withheld.

As a traditional partnership – not an LLP – Slaughter and May is not obliged to publish its financial results.



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