Britain's legal industry is demonstrating remarkable resilience against economic challenges, reporting significant growth in both staffing levels and profitability during the past year.
Financial Performance and Headcount Growth
Despite facing ongoing salary pressures and increasing employment taxes, legal practices across the UK have achieved an average headcount increase of nearly 4 per cent over the last twelve months. According to the comprehensive law firm benchmarking report from professional services firm Crowe, this expansion has primarily concentrated on fee-earning roles, while almost half of firms reported either maintaining or reducing their support staff numbers.
The financial performance reveals a stark contrast between different types of firms. City firms recorded an impressive 8.2 per cent increase in fees per partner during the last financial year, pushing the average to £1.3 million per partner. Meanwhile, partner profit pools surged by over 12 per cent for these metropolitan practices.
However, regional firms experienced a different reality, witnessing a decline of over 10 per cent in partner profits despite showing fee growth. This divergence likely stems from City firms' involvement in complex, high-margin work including corporate transactions, regulatory advisory services, and international disputes, typically serving large corporate and financial institutions.
Operational Efficiency and Cyber Security Focus
The report highlighted significant improvements in operational metrics, with City firms reducing their lock-up period – the total time and value of unbilled and unpaid work – to 135 days. Regional practices also showed modest improvement, bringing their average down to 140 days.
Cyber security has emerged as a critical concern, with 22 per cent of firms experiencing a cyber incident within the past 12 months. As threats become increasingly sophisticated, human error remains one of the most common vulnerability points for attackers.
In response, the sector has dramatically increased its focus on proactive risk management, with 81 per cent of firms now employing dedicated cyber specialists. Nicky Owen, head of professional practices at Crowe, emphasised the seriousness of this threat, noting that "Concerns around cybercrime continue to rank highly, and rightly so, with 1 in 5 firms experiencing a cyber incident in the past 12 months alone."
Technology Adoption and Future Outlook
While cybersecurity investment grows, law firms are taking a measured approach to artificial intelligence adoption. The report revealed that 73 per cent of firms lack a clear strategy or vision for how AI can support their operations, with client information confidentiality emerging as a primary concern among respondents.
Regarding ownership structures, all participating firms (100 per cent) confirmed they currently operate without private equity backing, despite growing interest from investment firms in professional services. Owen suggested that "the appeal of external capital injection could clearly prove useful in the pursuit of ambitious growth and innovation targets," while noting that 2026 might witness significant investment announcements.
Owen concluded with an optimistic assessment of the sector's trajectory: "The legal sector continues to show strength and resilience, with solid financial foundations and optimism for achieving future growth targets." This confidence appears well-founded given the sector's ability to navigate economic headwinds while maintaining growth momentum.
