Allen & Overy stunned the City's legal market today by announcing an increase of 11 per cent in first-half revenue driven by a rush of work arising from the financial crisis.

The "magic circle" firm generated fee income of £548 million for the six months to October 31, up from £494 million during the same period last year.

That was short of the 15 per cent growth Allen & Overy reported for the last full financial year, when it passed £1 billion in revenue for the first time, but still well ahead of predictions.

Although law firms across the City have experienced a decline in areas such as M&A, private equity and real estate, which fuelled the boom in legal services in recent years, a handful of the largest firms have been frantically busy advising on the bailout of some of the world's biggest financial institutions.

Since September, Allen & Overy has advised HBOS on its rescue by Lloyds TSB, the Dutch Government on its bailout of Fortis and several major financial institutions caught up in the collapse of Lehman Brothers.

"Clients are facing really difficult times, with complex cross-border issues, and they are coming to us for help," Wim Dejonghe, the firm’s managing partner, said.

The firm said it had also experienced a "deluge" of litigation work since the crisis began, advising investors and lenders on their positions with troubled institutions and on a range of other insolvency complications.

It had also been called in to investigate numerous allegations of mis-selling of complex financial products, although none has yet led to court proceedings.

Allen & Overy's surprising performance will be regarded as a vindication of its aggressive push into emerging markets in recent years. Half of the firm’s revenue last year was generated outside the UK and its 5,500 staff are now spread across 31 cities.

"Business is holding up for us because of the investment we have made in building a multi-disciplinary, global firm," Mr Dejonghe said.

Lovells and Norton Rose, two other firms that boast a significant international presence, were the other standout performers among firms to have released first-half year results. Lovells rose 15 per cent to £260 million, while Norton Rose was up 11 per cent to £141.5 million.

In contrast, firms focused on the UK have performed poorly, with Eversheds, Addleshaw Goddard and Wragge & Co all reporting a decline in first-half revenue.

However, Mr Dejonghe warned that even the biggest firms will face a difficult second half of the year. "These are unprecedented times for all of us, so we remain cautious in our outlook," he said. "No-one can predict with any certainty what will happen in the next six months," he said.

Allen & Overy is the only "magic circle" firm to have released its half-year results. Linklaters, which secured a lucrative role on the liqudiation of Lehman Brothers, is not expected to finalise its figures for several weeks. Clifford Chance and Freshfields Bruckhaus Deringer declined to release theirs. As partnerships, law firms are not obliged to publish financial results at the half-year stage.

Half-year revenues

Allen & Overy £548m, up 11%
Lovells £260m, up 15%
Eversheds £188m, down 4%
Ashurst £158m, up 7.5%
Simmons & Simmons £143.5m, up 5.5%
Norton Rose £141.5m, up 11%
Addleshaw Goddard £94.7m, down 2.8%
Clyde & Co £83.6m, up 10%
Denton Wilde Sapte £78.3m, up 6%
Nabarro £64m, no change
Wragge & Co, £56m, down 6%
Halliwells £44m, up 4.8%
Trowers & Hamlins £42m, up 16%

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