Revenues at law firms grew at a rate of 12% last year - double that of 2021 - according to a regular snapshot of the sector. That growth translated into higher profits for 77% of City firms and 61% of regional firms, according to figures collected by audit, tax and advisory firm Crowe. 

Although an overall improvement on pandemic-blighted 2021 was expected, more than half - 56% - of firms said their results exceeded expectations. Profit per equity partner grew by an average 15% in the City and 5% in the regions. 

However the survey found that some firms struggled to match last year’s rise in profitability thanks to rising costs. This was largely attributed to the return of post-pandemic travel and business development events, as well as a rise in recruitment-related costs. Both headcount and cost per staff member rose, by 4.2% and 4.9% respectively.

Looking to the future, respondents were bearish on the UK economy, with none reporting a positive outlook. Although the outlook for the broader economy was bleak, there was greater optimism for the legal sector, specifically, where most expected at least a neutral or consistent outlook.

Nicky Owen, professional practices partner at Crowe said: 'As various headwinds continue to impact the economy at large, the legal sector has again performed well. Cautious optimism looks set to continue in 2023. However, the full impact of inflationary pressures and salary shifts may still be felt in the coming months.'