The UK’s biggest law firms are charging clients an inflation-busting 40% more than they did five years ago, as they continue to accelerate away from the pack.

At the UK’s 10 largest firms by income, growth at US firms in London and the so-called ‘war for talent’ helped boost the average rate per chargeable hour to £449 in 2024, up from £321 in 2019, according to PwC’s 33rd annual Law Firms’ Survey. That is nearly 15 percentage points higher than the Bank of England inflation rate of about 25% over the same five-year period.

In real terms, chargeout rates declined in the 11-25 category (14% higher than 2019), while the top 26-50 and 51-100 cohorts have increased fees by roughly the rate of inflation (22.8% and 23.5% respectively).

Firms do not generally disclose their fee rates. PwC said it came up with the figures by taking total income for the year and dividing this by total chargeable hours.

PwC Law firms survey 2024

Source: PwC

Mark Anderson, global legal & professional services leader at PwC UK, attributed the higher chargeout rates among the top 10 to increased specialisation, inflation, and a resurgent corporate and deals market post-pandemic.

The report delivers a generally benign overview of the market. Over the past year, net profit margins climbed 0.5 percentage points to 41.2% among the top 10; 0.3 percentage points to 27.7% in the top 11-25; and 0.7 percentage points to 25.2% among the top 26-50. The margin dipped 0.2 percentage points for the bottom 50, to 23.5%.

All top-100 bands grew profit per equity partner, many by double-digit percentages.

Across the board, target chargeable hours remained largely flat. In Top 10 firms, there has been a slight increase in target chargeable hours across most grades of 2-3%. 'The increase in chargeable hours is consistent with a push by firms for greater productivity from their fee-earners as the emphasis on commercial performance increases,' said PwC. 'We expect this push on utilisation to continue for the foreseeable future.'

Firms are using incentive schemes to drive performance, with 95% of Top 100 firms reporting that chargeable hours logged was used to determine bonus payments, followed by firm-wide performance (70%), business development (67%) and behaviours/values (63%).

All firms expect clients to push for lower prices as a result of the adoption of GenAI. Nine out of 10 top-100 firms now have implemented or trialled GenAI tools, compared with just 55% in 2023. 

The number-one growth risk identified by firms is cyber threats, with spending on security higher across all bands in the top 50.