PwC 2025 UK Law Firm Survey

The PwC 2025 UK Law Firm Survey is available here, and always a good read

There's a picture painted here of the Top 10 continuing to pull away from Top 11 - 100 firms - and that's illustrated most clearly on p13, showing Top 10 PEP of £1.8m, compared to £1m for Top 11 - 25 and £0.6m for Top 26 - 100 firms

On average, all categories of firms now have PEP ahead of inflation over the post-pandemic period and I would take that as a positive

Beneath the broad brushstrokes there are some themes to tease out

Rate Increases (pp33-34)

It's hard to compensate for lacklustre rate growth through cost control and, as with previous years, Top 10 firms have been better at achieving higher effective rate increases (10%) - a key factor in their strong performance in recent years

I am pleased to see 51-100 firms achieving a 6% increase on 2024, but the remaining firms are just about treading water against CPI at 3%

That 'squeezed middle' really needs to give some thought as to why both larger and smaller firms are able to increase fees, but they are not. There is no good reason obvious to me here

Fee Earner Leverage (p21)

The ratio of fee earner to full equity leverage has remained broadly flat across the industry, although I would note the contrast between a ratio of ~6 fee earners to 1 equity partner in the Top 10 vs ~9 outside

Across the board, I question how sustainable it is to expand the FSP and non-equity partner ranks faster than either the full equity, or the non-partner fee earners

The short term reasons for this are well known - restricting access to the equity to boost PEP, or no-one wants to be an equity partner anymore (depending on your perspective!) but at the other end of the traditional law firm pyramid there's a fairly sharp drop in the number of trainees in Top 25 firms

It feels premature to me to attribute this to AI (esp. given p14), but it is potentially consistent with the increasingly negative impact of AI anticipated by firms (p16) - with most of the benefits expected to accrue to clients with a reduction in work for law firms themselves

Utilisation (pp22-23)

Mixed fortunes here. Larger firms tend to run with higher chargeable hours and utilisation expectations and you can see that at a summary level on p23 but also at a more detailed level by seniority on p22.

I note that Top 11 - 50 firms have reduced (i.e. improved) their spare capacity since the last survey, whereas 51 - 100 firms have seen a 1.7 percentage point deterioration

However, it's the Top 10 firms that are the potential canary in the coal mine for me:

• spare capacity is up 3.6 percentage points (50% !)

• that is across the majority of seniority levels (p22)

• if the AI pessimism on p16 comes to pass, this is only going to get worse

• 9+PQE and FSPs hours are down 8-9%. Given the increased numbers of these - expensive - roles, the reduced chargeable hours will likely put the broader business model under strain

  
  

Tentative conclusions...

Disclaimer: The survey presents bandings of firms and averages. The variation within those bandings is likely to be greater than the variation between bandings and so take the following with a healthy pinch of salt (YMMV etc...)

Additionally, if you're a survey participant, you can benchmark your individual firm performance against the survey results (contact details on p37)

That said:

• Top 10 firms need to get to grips with AI, increase work volumes and utilisation (but well done on rate increases)

• Top 11 - 50 - sort your pricing out

• Top 51 - 100 - well done on price increases, but keep an eye on slippages in utilisation as you're fast approaching a full day p/week with no chargeable work

MS Copilot generated image of 'a picture painted'