The UK legal services sector showed resilience in 2022, with revenues growing compared to a year earlier, albeit at a slower pace, according to TheCityUK’s 2023 legal services report.

The report revealed that sectoral revenue increased by 5.6% to £43.7bn in 2022 from £41bn in 2021, which itself was a 12.5% increase on 2020. The UK’s legal sector has now posted cumulative growth of about 60% since 2012.

The legal services sector contributed £34bn to the UK economy in 2022, maintaining its 1.6% share of gross value added, and achieved a trade surplus of £5.7bn.

The internationalisation of City law firms was prominent, given the strong presence of top global law firms in London and the rise in UK exports of legal services, which hit a record £7.3bn in 2022.

The revenue of the world’s 100 largest law firms – two-thirds of which are American – grew 15% in 2021/22 to $147.5bn, with 20 firms reporting turnover exceeding $2bn.

Miles Celic, CEO of TheCityUK, said such success could not be taken for granted: “To maintain its global pre-eminence in legal services, the UK’s reputation for the rule of law must be protected and enhanced. To foster job creation and drive economic growth across the country, the UK must support innovation in legal services, particularly within the exciting and fast-growing LawTech sector.”

Meantime, employment in the sector slightly decreased to 368,000 from 375,000 in 2021, while there was a commensurate decrease in training contracts, which fell 10% in the year to 31 July 2022 to 4,952.

Two-thirds of legal sector employees were based outside London, with Manchester the most populous city after London with 13,000 employees, followed by Leeds with 11,000, Birmingham with 10,000 and Bristol with 9,000.

The report found City law firms were having to consider changing their operating models and “increasingly turning to mergers and acquisitions to build scale, deepen specific practice experience and enter new geographical markets”. This was underscored by recent deals such as Allen & Overy’s merger with Shearman & Sterling.

The report also highlighted the significance of English common law globally, with parties from 78 countries using the English commercial courts in 2021/22. 

Luke Harrison, London International Disputes Week (LIDW) co-chair and a partner at London disputes boutique Keidan Harrison, said: “The report demonstrates that the legal services industry, of which international dispute resolution is a significant part, generates a material contribution to UK GDP.”

He added that LIDW, taking place in June 2024, will “play host to the world’s premier practitioners and enable participants to develop a greater understanding of the secret of London’s success”.

Nick Vineall KC, chair of the Bar Council, said: “This welcome report underlines the global importance of English law and UK dispute resolution,” adding that while legal services are a huge contributor to the economy, “the government needs to recognise that the court service itself, and lawyers working in publicly funded cases, are woefully underfunded”.

Justice Secretary Alex Chalk MP, who was due to attend the launch of the report but which was postponed owing to urgent Parliamentary business, highlighted “the extraordinary success of the UK’s legal sector and the vital contribution it makes to our economy”.

Chalk added: “We don’t take these achievements for granted and will continue to promote English and Welsh law, and the UK’s legal sector, around the world at every opportunity.”