Law firms remain resilient in tough economic times

Against a tough economic backdrop and with the cost of living rising sharply, law firms saw profits go only marginally down, according to the Law Society’s Financial Benchmarking Survey that provides an overview of the financial performance of the legal sector.

The research shows that profits per equity partner continued the pre-COVID trend, with median net profit decreasing by 0.7% (from £211,204 in 2022 to £209,650 in 2023).

Despite the economic environment, the number of support staff in law firms increased by 3% and total salary costs as a percentage of fee income increased by 0.2%.

The number of chargeable hours decreased by 2.5% from 816 in 2022 to 793 in 2023 against the 1,100 chargeable hours per year used as a rule of thumb by many firms. Median spend on non-salary costs per fee earner increased by 13.1%.

Nick Emmerson, president of the Law Society, said: “Although law firms are proving to be financially strong and resilient, we live in tough economic times and this survey is an opportunity for law firm leaders to plan for the future. Despite costs rising and billable hours decreasing, profits have only marginally declined.

“The legal sector remains healthy, continues to be an important driver of the UK’s economy and a significant employer. In fact, the overall number of people employed by law firms has risen even if the lack of government investment in legal aid is hitting some firms hard.

"In the current crisis, solicitors are needed more than ever to help people access justice in their time of need. The government must take action to address the deficit in legal aid now.”

Paul Bennett, chair of the Law Society’s Leadership and Management Section said: “The resilience of law firms shines through this year’s survey. Economically, it is a tough period, but firms are doing well.

"The obvious challenge of productivity shown in the reduced billed and recovered hours is a likely good place for law firm leaders to support their teams with training and personal development.

“The profitability challenge is also something which may benefit from training for law firm leaders, as we know pricing training and skills enhancement on the setting and recovery of fees can help.

“Firms reviewing this year’s survey might like to reflect how post-COVID challenges can be an opportunity to demonstrate inspiring leadership. Considering current and future fee income, collection, and capital needs can be useful to help plan ahead.

“We would like to thank those who took part in the survey. Benchmarking should help them with planning and revising goals as every firm who participates gets a personalised summary with their own data.”

Becci Wicks, national sector head, legal services, Business and Commercial Banking of Lloyds Bank said: “We are delighted once again to be sponsoring the Law Society’s annual benchmarking survey, which continues to provide vital benchmarking data for law firms and create valuable insight to support critical business decision making.

“There was a number of macro and geo-political impacts across 2023, but our sector remains resilient and we remain by the side of our business customers to support them through this year and beyond.”

Notes to editors

• The Financial Benchmarking Survey 2024 is written and produced by the legal team of Hazlewoods LLP for the Law Society Leadership and Management Section and sponsored by Lloyds Bank Commercial Banking
• In its 23rd year, the survey for 2024 collected financial data from 147 firms, with a combined income of over £1.5 billion, making the survey one of the largest of its type in England and Wales
• Firms who would like to register their interest to participate in the 2024/25 survey can contact benchmarking@hazlewoods.co.uk

About the Law Society

The Law Society is the independent professional body that works globally to support and represent solicitors, promoting the highest professional standards, the public interest and the rule of law.

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