Law firms upbeat on performance as revenues roll in

Two benchmarking surveys published in almost as many days this week paint a picture of business optimism in law firms.

NatWest’s 10th legal report, based on a survey of 100 firms with an average turnover of £20m, reports 90% of respondents declaring optimism, up from 87% in 2023. Firms reported growth in both income and profitability: median profit per equity partner increased by 10%, to £274,000, in 2024. The increase was markedly larger at smaller firms (16%) than at large ones (6%).

Meanwhile, 88% of firms said they expect their fee income to increase in 2025.

The labour market in the legal sector remains a concerning issue, with 44% of respondents citing the attraction and retention of talent as their biggest challenge over the next 12 months. Pressure on margins and improving productivity were also recognised as challenges.

This generally upbeat outlook was echoed in the Law Firm Benchmarking survey by accountancy firm Crowe and the Institute of Legal Finance and Management. It found that 89% of firms are expecting increased revenues in the current financial year and 39% of firms increased revenues above the rate of inflation in 2024.

However, average fees per partner in City firms dipped for the second year in a row to £1.5m. Regional firms are closing the gap with London with an average of £955,000, a 5.9% increase from last year. Headcount increased at 71% of firms.