Hundreds of partners at the City’s leading law firms earned more than £1 million this year, despite the sudden downturn in the commercial legal market.

The number of lawyers who took home seven-figure sums was lower than last year, when a record eight firms had average profit of more than £1 million per partner, yet the sector still produced an enviable number of millionaires. Partners at the ten biggest firms earned an average of £872,000 in 2008-09, down 20 per cent, according to a report published today by PricewaterhouseCoopers (PwC).

However, not all City lawyers did so well. Partners at firms outside the top ten suffered a 28 per cent fall in average profits, from £614,000 per partner to £444,000, PwC said.

Alistair Rose, head of PwC’s professional partnerships advisory group, said that the top ten firms had emerged from the downturn as clear winners and had extended their lead over the chasing pack.

After five years of double-digit growth, most City law firms suffered a decline in revenue and profit in 2008-09, PwC said. A sudden decline in big transactions and pressure to reduce fees led many firms to take drastic measures to cut costs, including trimming their partnerships, making swingeing redundancies and freezing salaries.

However, the City’s premier firms were spared the worst of the downturn by their network of overseas offices and a steady stream of financial bailout work.

Allen & Overy, Linklaters and Freshfields Bruckhaus Deringer all reported profits of more than £1 million per partner this year, with those at the top of the pecking order at Freshfields receiving £1.7 million. Slaughter and May does not disclose its financial results, but its top partners are expected to make upwards of £2 million, making them the best-paid in the City.

Ashurst, Clifford Chance, Herbert Smith and Macfarlanes all slipped out of the elite £1 million-per-partner club this year, but pay of the top partners was still close to seven figures.

Among the City’s highest-paid lawyers are David Cheyne, senior partner at Linklaters; Nigel Boardman, of Slaughter and May, who advises Marks & Spencer and Arsenal Football Club; and Sir Nigel Knowles, co-chief executive of DLA Piper, the world’s largest law firm.

Partners at second-tier firms fared much worse this year than their “magic circle” rivals, PwC said.

The firms ranked No 11 to No 25 in size experienced a 9 per cent slump in revenue, in part because of their reliance on practices such as private equity, mid-market mergers and acquisitions and commerical property, which were hit badly by the downturn.

Two thirds of those firms issued a capital call in the past year, with the average partner required to contribute £44,000, PwC said.

Overall, the number of hours billed by lawyers at City firms fell 20 per cent, the survey found. Many firms suffered a dramatic loss of productivity in their overseas offices, with partners in the Middle East the least busy.

Salaries for junior lawyers fell by 8 per cent on average, according to Hughes-Castell, the legal recruiter.Competition for talent had pushed starting salaries as high as £100,000 in recent years.

However, since the start of the crisis many firms have frozen salaries and cut up to a tenth of their staff. A quarter of firms imposed shorter working weeks or sabbaticals to slash their wage bills.

Those who lost their jobs had little chance of finding other work, with vacancies down 95 per cent in the first six months of this year from the market peak in 2007.

Times Recommends

• Toyota recalls 437,000 cars including Lexus
• Myners says bonuses are bleeding pension funds
• Japanese company faked safety reports on seats