Lucrative work on the bailout of the financial sector has helped Freshfields Bruckhaus Deringer overtake Clifford Chance to become Britain’s highest grossing law firm.

Freshfields defied the turmoil in the global legal market to increase full-year turnover by almost a tenth and hold profits at the previous year’s record levels.

Profit per equity partner — the key measure of law firm profitability — held steady at £1.44 million, in contrast to the plunge in profits at other firms. Clifford Chance this week reported a 37 per cent slump in profits, from £1,156,000 per equity partner in 2007-08 to £733,000 for the 12 months to April 30.

Freshfields, which advises the Bank of England and Tesco, generated £1.29 billion in fees in the year to April 30, driven by its roles in the bailout of the financial sector and a surge in restructuring work. Revenue at Clifford Chance fell 5 per cent to £1.26 billion.

Linklaters and Allen & Overy, its “magic circle” rivals, have yet to release their results for 2008-09.

Ted Burke, Freshfields’ chief executive, said: “We’re fortunate to have come through a challenging year in relatively good shape.”

Unlike other firms that had relied on big commercial and investment banks for a significant chunk of their fee income, Freshfields is geared towards corporate transactions. It boasts several of the City’s top dealmakers, including Will Lawes, who heads its financial institutions practice, and Mark Rawlinson, who represented Manchester United in its acquisition by the Glazer family.

Freshfields was also better positioned than many of its rivals because of a controversial £40 million overhaul of its partnership two years ago, legal consultants said.

Although disruptive at the time — it prompted an unsuccessful but publicly damaging £5 million discrimination lawsuit by its former head of restructuring — the shake-up left Freshfields leaner and more focused as the credit crunch began.

Since then, its management team — spearheaded by Mr Burke, Konstantin Mettenheimer and Guy Morton, who took over as co-senior partner from Anthony Salz, now vice-chairman of Rothschild — have taken a tighter grip on the strategic direction of the firm.

As a result, Freshfields has so far avoided the signficant job losses at other firms, although it was the first to freeze salaries and cut starting rates for newly qualified lawyers. In contrast, Allen & Overy has cut about 450 lawyers and support staff worldwide and Linklaters about 400.

Dominique Graham, a director of Graham Gill, a legal consultancy, said. “They started getting themselves in shape well ahead of any other firms so that when the recession hit they had already taken the ruthless decisions.”

Despite the strong performance, Mr Burke warned that the 2009-10 financial year would be more difficult. “We know that next year is going to be a different story. The legal sector lags the real economy — always has, always will.”

Linklaters will announce its full-year results today, while Allen & Overy’s results are expected next week.