Law firms in England and Wales recorded their strongest growth rate in more than 15 years in 2025, according to the Law Society’s latest annual Financial Benchmarking Survey.
The reported showed that median practice fee income increased by 11.2% in 2025, up sharply from 6.1% in 2024. Some 85% of firms reported year-on-year fee growth, with 55% achieving 10% or more, and more than a fifth posting at least 20%. Total fee income across participating firms exceeded £1.2bn, equating to an average of £9.9m per practice.
The findings suggest that, despite economic uncertainty and rising investment needs, firms have continued to expand while improving operational performance.
The number of fee earners increased by 2.3%, reflecting sustained demand for legal services. At the same time, productivity improved for a second consecutive year, with the median number of chargeable hours per fee earner rising to 807 from 756 in 2024.
Profitability also strengthened. The survey identified productivity as the sector’s “most powerful profit lever”, with higher chargeable hours, lower overheads and reduced lock-up all contributing to improved financial performance.
Non-salary overheads per fee earner were broadly stable at £46,916, compared with £47,098 in 2024, but fell as a proportion of fee income to 28.4% from 31.0%. Total year-end lock-up days fell from 146 to 134, or from 156 to 144 when unbilled disbursements were included. Profitability per equity partner, excluding interest, grew by 10.5% in 2025.
The survey also pointed to a more balanced profit picture. Client interest accounts accounted for a far smaller share of profitability growth than in previous years, described as encouraging because it indicated that core legal services, rather than interest income, were driving performance.
The findings follow the closure of a government consultation on proposals to raise funds through an Interest on Lawyers’ Client Accounts Scheme, a move opposed by the Law Society and others.
Cybersecurity emerged as a defining challenge, with leaders increasingly focused on the impacts of cyber threats, particularly in the wake of high-profile incidents, such as 2025’s Legal Aid Agency data breach.
Concerns about artificial intelligence (AI) accounted for a growing percentage (12%) of total risks identified. The survey also said rising IT costs, driven by software market consolidation and increased AI spending, was the main factor behind higher non-salary overheads.
The survey also found that the regulatory climate regarding retaining client money was a leading concern, including greater Solicitors Regulation Authority scrutiny, high-volume claims work and governance standards, following the Axiom Ince, SSB and other collapses requiring intervention.
Recruitment and retention issues, rising employment cost and the increased national insurance contribution threshold together accounted for almost a third of all concerns raised.
While the median cost of a fee-earner fell slightly by 0.4% to £70,551, spending on support staff rose to £27,061 per fee-earner from £25,655, underlining the report’s conclusions on law firm investment in technology and operational support.
Mark Evans, president of the Law Society, said: “Despite ongoing external uncertainty and an increased need to invest in new technology, law firms are seeing strong growth,” adding that “the legal sector remains healthy and resilient”.
Abby Winkworth, chair of the Law Society’s Leadership and Management section and consultant, said: “Firms that perform well do so because they have maintained discipline in the core operational drivers of a sustainable legal business,” adding that this includes “productivity, pricing, cost control, cash management, client service, people management and leadership capability”.
“Whether the topic is time recording, billing behaviour, support staff deployment, overheads or working capital, the message is consistent,” she said, noting that “small, incremental improvements, applied consistently, compound into meaningful gains”.
Commenting on the survey’s findings, Byfield co-managing director, Ben Girdlestone, said: “Even though the apparent partial absence of the rule of law appears to be driving the world’s largest economy to extreme action on an international scale, it is heartening to see the resilience of the UK legal sector, surely one of our gilt-edged industries.”
He added: “Progress marches on and the need to ramp up technology is necessarily near the top of leaders’ to-do lists, as this is the main driver behind the expected burst of private equity investment which is surely to come.”
Now in its 25th year, the 2026 survey collected financial data from 121 firms, with a combined fee income of more than £1.2bn – an average of £9.9m per practice. The survey was produced by accountants Hazelwoods, with support from Lloyds Bank, and published by the Law Society’s Leadership and Management Section (formerly the Law Firm Management Section).
Email your news and story ideas to: [email protected]
