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One of the City’s most prestigious “magic circle” law firms has witnessed an 8% decline in profits, despite achieving a milestone £2 billion in revenue for the first time. Freshfields’ latest financial filings at Companies House revealed pre-tax profits fell to £665 million in the year ending 30 April, down from £725 million in the previous period.
The firm’s profit margin now stands at just over 33%, significantly lower than its magic circle competitors who typically maintain margins between 40% and 45%. The results come after Freshfields’ strategic decision to withdraw from the traditional summer financial reporting practice common among City law firms.
The organisation, which recently simplified its branding by dropping “Bruckhaus Deringer”, has moved to a calendar year-end reporting schedule, providing only mandatory accounts information. Prior reports had indicated full-equity partners received average payments of £2.09 million, though current estimates suggest this figure may have decreased substantially across the firm’s approximately 440 full-equity partners.
Staff costs rose markedly during the period, with the wage bill increasing 15% to reach £1.1 billion. This stands in stark contrast to rival magic circle firms’ performances, with Linklaters reporting its highest-ever pre-tax profit of £942 million, marking a 10% increase, while Clifford Chance saw partnership profits rise 10% to £856 million.
Industry analysts suggest the profit decline might be attributed to adjustments in Freshfields’ pension scheme and increased investment in US operations. The firm has chosen not to comment on these latest financial results, maintaining its new approach to financial disclosure.
The remaining magic circle member, Slaughter and May, continues to operate as a traditional partnership and remains exempt from publishing financial results, while Allen & Overy reported flat pre-tax profits of £892 million prior to its merger with Shearman & Sterling.
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