Britain's four largest law firms each earned more than £1 billion last year, confirming London's emergence as the centre of the global legal services market.

Allen & Overy will today announce a 15 per cent increase in revenue for 2007-08 to £1.02 billion, becoming the latest firm to break the billion-pound barrier. Profit increased 13 per cent to £447 million, with its top partners making £1.6 million.

Last month, Clifford Chance revealed revenue of £1.33 billion, up 13 per cent, while Freshfields Bruckhaus Deringer achieved £1.17 billion, up 19 per cent. Linklaters is expected to match them when it reports its results today.

The quartet's rise means that four of the world's six largest law firms are based in London. The two others, Latham & Watkins and Skadden, are based in the US.

David Morley, senior partner of Allen & Overy, said that the results vindicated the firms' aggressive global expansion in recent years. Growth in markets such as Russia, China and the Middle East had compensated for the slowdown in the UK, with half of their revenue coming from overseas.

Mr Morley said: “We are seeing the emergence of a legal global elite who have the reach, scale and quality to compete at the top end all around the world.”

Tony Williams, principal of Jomati, a legal consultancy, said that the top four were likely to maintain and even increase their lead if the downturn worsens, with clients seeking a “flight to quality”.

A decade ago, several firms told of their wish to unseat the so-called magic circle, but the gap may be insurmountable. Lovells, the next-largest City firm after Allen & Overy, reported revenue of £479 million, less than half A&O's figure.

Mr Williams said that the widening gap could lead to smaller firms seeking to merge in order to compete: “Size and breadth isn't all, but it's important and as those big firms put more blue water between them and everybody else it becomes more difficult to match them organically.”

Although last year was a record, with many of the top 50 firms reporting revenue increases of between 10 and 30 per cent, many observers agree that the market has peaked. Law firms are usually among the last to feel the effects of a downturn and although some will be insulated by counter-cyclical business such as litigation, they are likely to struggle to sustain the high growth seen in recent years.

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