The lucrative earnings at American law firms are luring increasing numbers of top London lawyers, according to a new survey released today.

Research by Legal Business magazine found that 71 partners left UK law firms for their American rivals in London last year. The majority left for the higher salaries paid by the American outfits.

Billings per US partner easily outstrip those of UK law firm partners: the top American law firm partner bills £1 million a year, while the best that a British law firm partner is likely to generate is £800,000 annually.

Despite the strength of sterling against the dollar, total revenue of the US law firms in London grew by 17 per cent to £1.4 billion in 2006 compared with the year before. By contrast, revenues at the biggest 50 London law firms at the year-end in April 2006 had grown by 13 per cent.

Stephen Doggett, who conducted the survey at Legal Business, said that the profits per equity partner, a vital benchmark figure on law firm performance, for US law firms in London well exceeded their British rivals. “In 2006, the average profits per equity partner in US law firms in London was £670,000, compared with £549,000 for UK firms,” he said.

American firms continue to be more efficient in the capital. The average revenue per lawyer — the fees billed by each lawyer — for these 50 firms was £450,000. The very best UK firms struggle to compete with that figure. Last year the only UK firm to exceed it in London was Freshfields Bruckhaus Deringer, whose lawyers each billed £484,000 on average.

The best US firms in London are many leagues ahead. For example, Sullivan & Cromwell, a New York-based firm which has just 56 lawyers in the capital, had a revenue per lawyer of £977,000 in 2006.

As long as American firms continue to be so far in advance in terms of revenues per head, then UK firms are unlikely to challenge them on profits per partner.

The survey, an annual report on the top 50 US law firms in London, shows that for the first time in a decade of exceptional growth, there has been a slight decline in the total number of lawyers at global law firms in London.

Between 1999 and 2005, the number of lawyers working at the largest 50 of the London US law firms trebled, reaching a peak of 3,353 lawyers. This year the survey finds that the momentum has slowed, with 22 fewer US lawyers overall in 2006 and the seven largest law firms recording a significant decline in headcount last year.

Even if it is slowing, the growth in the firms has been rapid: Mayer, Brown, Rowe & Maw increased its headcount from 30 to 241 between 1999 and 2006, White & Case has grown from 42 to 241, Skadden, Arps from 32 to 115, Baker & McKenzie from 165 to 247.

The largest firms are making cuts in a bid to boost profitability: Mayer Brown has been restructuring since its merger with Rowe & Maw in 2002.

Michael McDonald, who left Allen & Overy last summer to join Cleary Gottlieb Steen & Hamilton, told Legal Business: “The success of the US firms’ approaches is borne out by the fact that when you look at the biggest European deals in the market, many are being led by US firms.”

Another partner, Mark Greene, of Cravath, Swaine & Moore, said: “When we talk to leading independent firms in Europe, we find that they are far more concerned about US firms than UK firms. Even US firms that are frankly second-tier in the US are becoming strong in Europe. A number of US firms have realised that they won’t be able to make it in New York and so they have gone abroad instead.”

The survey found that despite rumours that the US firms want to branch into new areas, such as insurance and disputes, corporate and finance work remain their bulwarks.

Explore Law

• Corporate Law

• Public Law

• Columnists

• Law Panel

• Student Law

• Law Reports

Times Recommends

• HM Revenue sued over pension scheme tax
• Farepak liquidators to sue former directors
• McCartney and Mills: it's finally over