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"Larger firms have been looking long and hard at their cost base and how much can be outsourced," Mr Rose said. Clifford Chance, for example, has established a support centre in India to perform low-level work such as document production and expects to save £8 million a year from the initiative.

The larger firms were also better diversified having expanded rapidly in Eastern Europe, the Middle East and Asia in the past few years. Three-quarters of the top ten now generate more than 40 per cent of their revenues from outside the UK, the report said.

"If you're a medium-sized firm primarily focused on the UK you would be viewing the future with a lot less optimism," Mr Rose said.

But despite the record rise in profitability among the top ten, all law firms face a difficult second half of the year, Mr Rose said, with managing partners switching focus from revenue growth to reducing staff costs.

Redundancy talks have already been announced at a number of firms across the City, with almost 1,000 jobs cut already, according to The Lawyer, a trade magazine.

Firms are likely to be further squeezed as the downturn worsens with insolvencies leaving fewer clients to compete for. Those clients that remain are likely to demand reductions in fees and to delay paying bills.

That, Mr Rose said, could lead to law firms experiencing cashflow problems: "As the credit crunch bites, clients become more cash constrained and collecting that cash becomes increasingly important."

Already some firms, including Eversheds, the UK's eighth-largest firm, have told equity partners they will have to wait to withdraw their share of profits in a bid to shore up working capital.

Last year, the top 100 firms earned combined revenues of £13.96 billion, an increase of 14 per cent. However, half-year results released in the past month by some leading firms showed that the record growth rates had slowed.

KEY NUMBERS

£1.1 million - average profit per partner at the top ten law firms

£614,000 - average profit per partner at the 11th to 25th largest firms

£2.4 million - rumoured earnings of top partners at Slaughter and May, the City's richest firm

£13.96 billion - collective revenues earned by the top 100 firms last year

£2.9 million - average fee income generated by a partner at a top 10 firm

£5 million - billings for the City's top dealmakers

£21 million - average amount spent by top ten on technology

£6.6 million - average spent on technology by second-tier firms

132 days - average amount of time it takes for top ten firms to get paid

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