- 97% of the UK’s top 100 law firms posted UK fee income growth in 2024, with 84% increasing profit
- Generative AI becoming more polarising within the sector, with more concern on display outside the top 10
- Cyber risk returns as the main concern for growth ambitions in 2024
Following a successful few years of delivering growth against a challenging economic backdrop and global market volatility, UK law firms have continued to display positive financial performance, according to PwC UK’s latest Law Firms’ Survey for 2024.
Profits, fees and commercial performance
UK offices of top 100 law firms achieved a record year in 2024, with 97% of all firms surveyed posting UK fee income growth, including 100% of the top 50 surveyed. The extent of growth exceeded expectations set by firms in last year’s survey: top 10: expectation of 8.7% vs 11.6% actual; top 11-25: 7.9% vs 9.8%; top 26-50: 10.7% vs 11.7%; and top 51-100: 9.4% vs 12.5%.
This was in addition to measures taken to control costs, including staff costs in larger firms, leading to positive impacts upon UK profitability. Of the top 100, 84% reported increases in profit, compared to 56% last year.
Firms saw increases in overall chargeable hours as well as a rise in average rates per hour of between 3.7% and 6.9% year-on-year. However, this contrasts with average inflation in the year to April 2024 of 5.2% and only the top 51-100 firms pushed their rate per hour beyond average inflation, at 6.9%. Over the last five years, top 10 firms were shown to have made the largest increase to their rate, with growth of 40%.
UK - Trend in total rate per chargeable hour (£). Source: PwC Law Firms’ Survey 2024
Where UK firms struggled to convert increases in fee income to profit growth last year, the opposite was true for most top 50 firms this year. All bandings recorded increases in profit ahead of predictions in last year’s survey: top 10: expectation of 9.8% vs 13.1% actual; top 11-25: 5.9% vs 13.6%; top 26-50: 8.5% vs 15.6%; and top 51-100: 9.1% vs 12.4%.
Net profit margins achieved compared to last year were: top 10, up 0.5pp to 41.2% from 40.7%, top 11-25, up 0.3pp to 27.7%; top 26-50, up 0.7pp to 25.2%; and top 51-100, down 0.2pp to 23.5%. All bandings grew profit per full equity partner (“PEP”), with firms outside the top 10 recording the largest increases: top 11-25: up 17%; and top 26-50 and 51-100: up 14%.
Global performance
Global firms headquartered in the UK performed strongly at the fee income level, with top 10 and 11-25 firms increasing their revenues by 8.0% and 9.0% respectively. Across the top 25, 94% of firms recorded fee income growth and for 44% this was double digit growth.
In terms of source of growth by region, UK offices achieved more growth than their international counterparts, with 58% and 67% of fee income growth coming from UK offices for the top 10 and 11-25 firms respectively.
In top 10 firms, UK and Western Europe offices contributed 43% and 33% respectively to global fee income; however, profit contribution was greater at 46% and 35%. The majority (in excess of 90%) of growth in top 10 international profit came from Western Europe.
Cyber threat continues to raise concern over growth ambitions
Cyber risks returned to the top of the concerns list in 2024 and were cited as the biggest threat to firms’ future growth ambitions, with 90% of all firms either extremely or somewhat concerned that cyber threats could impact ambitions over the next two years. These concerns contributed to an increase in cyber security spending across all bandings in the top 50: top 10, up 20.7% to £7.4m; top 11-25, up 42.6% to £1.5m; and top 26-50, up 4.7% to £1.1m.
Macroeconomic volatility was the second most cited issue, despite reducing since last year (58% of the top 100 extremely or somewhat concerned vs 87% in 2023). Larger, international law firms were shown to be more concerned, linked to operating in global markets with increased exposure, whilst for UK-centric firms the economic outlook appears more positive. Concerns over geopolitical instability increased this year (54% of top 100 extremely or somewhat concerned vs 48% in 2023).
The threat of ‘Clients reducing demand through automation of legal work’ was a new option in this year's survey and 39% viewed this as either extremely or somewhat concerning.
Generative AI beginning to split sector opinion
Larger law firms were substantially more positive regarding the impact of GenAI on the legal sector, with 83% of the top 10 expecting the technology to lead to “increased productivity gains” and “allow them to do more work for the same clients”, compared to 14%, 37% and 28% of the top 11-25, 26-50 and 51-100 respectively. All firms expected a degree of pricing pressure to emerge as a result of GenAI usage, but firms outside the top 10 feared the greatest impact on margin, with over 50% fearing that clients will maintain the same volume of work, but expect reduced prices from improved efficiency gains.
Firms continued to invest heavily, with almost 90% of top 100 firms having implemented or trialled GenAI tools, compared to only 55% in 2023. 23% of the top 100 firms had also developed a proprietary GenAI tool using their own data, with the vast majority among the top 50.
Diversity, people and headcount
In the top 10, headcount increased by 2.6% (2023: 1.8%). Among the fee-earner population (including partners), headcount increased by 1.3% (2023: 2.2%). Investment in business support staff resulted in a 4.2% headcount uptick (1.3% in 2023).
Movements in other bandings also revealed an upward trend in headcount, with the range of increases, on a like-for-like basis, across the top 11-25, 26-50 and 51-100 firms being: total partners: 2.5% to 4.8% (2023: 2.3% to 4.8%); total fee earners (including partners): 4.9% to 5.5% (2023: 0.5% to 2.7%); and business support staff: 1.4% to 7.5% (2023: 3.3% to 5.5%).
Positively, female representation at full equity partner level trended upwards across all bandings, excluding the top 51-100. The top 10 firms saw the largest rise this year, reporting an increase of 4.8pp to 29.8% (reduced to an increase of 2.8pp on a like-for-like basis). Representation in the top 11-25 increased by 1.2pp to 22.6%, while an increase of 0.9pp to 24.8% was seen in the top 26-50. The top 51-100 reported a decrease of 1.4pp to 27.2%.
Trends were mirrored for minority ethnic representation at full equity partner level, with increases reported in the top 10 (8.8% to 9.0%), top 26-50 (4.5% to 5.5%) and top 51-100 (6.3% to 7.4%). The top 11-25 firms experienced a small decrease in representation (6.4% to 6.2%)
Following a sustained rise in staff turnover in 2023, 2024 saw reduced staff movement across the sector. While overall turnover has increased in the top 11-25 by 0.7%, it fell across the top 10 by 7.6%; top 26-50 by 2.1%; and top 51-100 by 1.2%.
Growth strategies
Firms continued to actively pursue, or consider pursuing, a range of methods to achieve organic growth. Improvements in client and account management planning (79% of top 100 actively pursuing and 18% considering); commercial training for partners and fee earners (79% and 12%) and hiring rainmakers (74% and 16%) were among some of the most popular methods.
With inorganic growth, lateral hires continued to be the number one option with 79% of the top 100 actively pursuing and 19% considering. The majority of firms were actively pursuing or considering a tactical acquisition, to either build scale in geography (60%) or practice area/service line (58%). A small minority of firms (18%) said they were actively pursuing a strategic merger or acquisition.
“Law firms are thriving. But with technology evolving at pace, the ability to innovate and adapt will be key to capitalise on the opportunities afforded by GenAI, data and cloud technologies. We expect firms to focus on the transformation of their operating models, and to rethink the size and shape of their future workforce.”
“UK law firms have proved themselves to be high-performing and resilient engines of growth. This year’s survey findings are welcome news and a testament to the ongoing agility and innovation within the sector. With the UK government this week rightly highlighting our professional and business services sector as a priority in its Industrial Strategy, we see significant grounds for optimism for the continued growth of UK law firms. However, robust risk management will continue to be essential to protect against cyber threats, changing workforce requirements, and the ever-increasing reputational risk that comes with renewed levels of focus on environmental, social and governance (ESG) considerations.”
About the research
2024 marks the 33rd PwC Law Firms’ Survey. The survey results are presented by size of firm using the bandings Top 10, Top 11-25, Top 26-50 and Top 51-100. The classification is by annual global fee income. The report is based on survey responses from firms at consistent response rates to prior years.
Key definitions
Global top 10
Top 10 (by global revenue) UK headquartered firms where international revenue exceeds 20% of total revenue.
Global top 11-25
Top 11-25 (by global revenue) UK headquartered firms where international revenue exceeds 20% of total revenue.
About PwC
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 151 countries with over 364,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
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