Legal sector defies economic headwinds with rising headcount and profits
Despite ongoing pressure on salaries and increases in employment taxes, legal firms have reported an average headcount increase of nearly 4 per cent over the past year.
According to the ‘law firm benchmarking report’ by professional service firm Crowe, the headcount growth was concentrated among fee earners, but nearly half of firms reported either no change or a reduction in support staff numbers.
City firms recorded an 8.2 per cent increase in fees per partner over the last financial year, bringing the average to £1.3m per partner.
While the partner profit pools have also increased by over 12 per cent, regional firms saw a decline of over 10 per cent in partner profits, despite fee growth.
The growth at City firms is likely driven by their involvement in complex, high-margin work, such as corporate transactions, regulatory advisory services, and international disputes, with a client base often comprising large corporate and financial institutions.
The report also noted that City firms have improved their lock-up, total time, and value of unbilled and unpaid work to 135 days, while regional firms report a modest improvement to 140 days.
Nicky Owen, head of professional practices at Crowe, stated: “The legal sector continues to show strength and resilience, with solid financial foundations and optimism for achieving future growth targets.”
Rise in cyber specialists
Cybercrime remains a significant concern for law firms, as threats continue to grow more sophisticated and relentless.
Crowe’s report noted that 22 per cent of firms have experienced a cyber incident in the past 12 months. But as threats evolve rapidly, human error remains one of the most common entry points for attackers.
As a result, the report highlighted that 81 per cent of firms now have a dedicated cyber specialist in place, reflecting a clear shift toward proactive risk management.
“Concerns around cybercrime continue to rank highly, and rightly so, with 1 in 5 firms experiencing a cyber incident in the past 12 months alone,” added Owen.
As cyberattacks weigh on leaders’ minds, law firms appear to be taking a cautious and deliberate approach when it comes to adopting AI, as 73 per cent of firms do not yet have a clear strategy or vision for how AI can support them.
One of the primary concerns, noted by respondents, is the confidentiality of client information.
Additionally, despite the surge in private equity firms’ interest in professional services, all (100 per cent) participating firms in this report confirmed that they are not currently backed by PE.
Owen added: “For firms, the appeal of external capital injection could clearly prove useful in the pursuit of ambitious growth and innovation targets.”
“However, while many scoping discussions are taking place behind closed doors, we are yet to see this translate into concrete investment in a meaningful way – 2026 may be the year that big investments are announced.”