Law firm partners’ pay rockets past rest of UK workforce
Partners at British law firms have seen their income rise over twice as fast as the rest of the UK workforce over the last five years.
According to data shared with City PM by Bowmore Wealth Group, the income of law firm partners rose 42 per cent to an average of £307,000 over the last five years, up from £216,000.
This is compared to the average UK salaries over the same period, which grew by just 18 per cent from £25,000 to £30,000.
Bowmore CEO Mark Incledon explained: “UK law firm partners have continued to experience strong income growth.”
“The increase in law firm payrolls, especially for associates, has not yet undermined the growth in profits. Demand has held up very well,” he added.
In the City, top law firms have partners earning well over £1m, while in some US law firms, such as Kirkland & Ellis and Paul Weiss, some equity partners are earning between £5m and £6m a year.
Even the junior end of the legal market at top firms in the City is taking home well over the national average, as newly-qualified (NQ) lawyers are paid £180,000 at the likes of Quinn Emanuel.
Most of the elite law firms in the City have reported high growth over the last financial year, with Clifford Chance and Linklaters both surging past £2bn in revenues.
However, these figures are significantly lower for regional middle-tier law firms.
The legal business, like many sectors, can be very volatile, as Incledon explained, “partners earn well, but when the economy or their firm takes a hit, that can have a very dramatic impact on their personal income.”
“If their law firm suffers that can feed through to their personal drawings very quickly meaning they don’t have enough surplus income to save that year,” he added.
Incledon warned: “Partners should ensure that they are saving and investing a higher percentage of their income than the average employee.” He added that those that “underinvest in their pensions could also be missing out on valuable tax reliefs.”
This is especially the case for the regional legal market, where the top line is a lot tighter than in the elite firms across the capital.
In the way law firms are structured, partners pay into the law firms in order to invest in the firm, so for big expensive such as AI tech, this can be tougher for those not generating billions in revenues.
Some in the legal sector have been gearing towards private equity investment, with several recent examples in the mid-tier market. For instance, south coast firm Trethowans was acquired by a private equity-backed legal services provider, Lawfront, in June.