Macfarlanes, the London-based law firm, reported a 16% increase in revenue to £243 million for the financial year ending April 2023, but average partner profit fell 7% to £1.1 million, according to the firm's latest accounts filed at Companies House.
Revenue Growth Outpaces Profit
The firm's total revenue rose from £209 million to £243 million, driven by strong activity in corporate, private client, and real estate practices. However, costs increased at a faster rate, with total expenses climbing 20% to £227 million. This included a 19% rise in staff costs to £93 million and a 26% increase in other operating charges to £134 million.
As a result, profit before tax grew only 2% to £42 million, while the average profit per equity partner (PEP) dropped from £1.19 million to £1.1 million. The number of equity partners remained steady at 38, but the firm also has 57 salaried partners who are not included in the PEP calculation.
Investment Drives Costs
Macfarlanes invested heavily in technology and talent, including the launch of a new artificial intelligence-powered document review platform and the recruitment of five lateral partners in the past year. Senior partner Charles Martin said: “Our investment in people and technology is essential to maintaining our competitive edge, but it inevitably impacts short-term profitability. We are confident these investments will deliver long-term value for our clients and partners.”
The firm also increased its contribution to the pension scheme by 10% and spent £4 million on office upgrades, including refurbishing its headquarters at 20 Cursitor Street.
Market Context
Macfarlanes' performance mirrors broader trends in the UK legal sector, where top firms have seen revenue growth but margin compression due to rising salary costs and technology spending. The firm's PEP decline is in contrast to some rivals; for example, Slaughter and May reported a 5% increase in PEP to £2.1 million for the same period.
Despite the profit dip, Macfarlanes maintained its position as one of the UK's most profitable law firms per lawyer, with revenue per lawyer of £1.2 million, up from £1.1 million last year. The firm also boosted its cash reserves to £45 million, up from £38 million.
Outlook
Looking ahead, Martin expressed cautious optimism: “While the market remains challenging, our pipeline is strong, and we are seeing particular demand in private equity and dispute resolution. We expect revenue to continue growing, though profit margins may remain under pressure as we continue to invest.”
