Regional law firms saw a 10.82% decline in partner profit pools in the past year in contrast to City law firms who saw a rise of 12.12% despite mounting cost pressures.
Audit, tax, advisory and consulting firm Crowe has released results of its Law Firm Benchmarking report, created in collaboration with The Institute of Legal Finance & Management, which offers key insights into the evolving landscape of the UK legal industry in 2025.
Key statistics include:
- Financial health-check: Partner profit pools grow by 12.12% for City firms despite increased cost pressures, while regional firms experience a decline of 10.82%; average revenue growth 10.84%
- Cyber security remains a priority with 22% of firms having experienced a cyber incident in the past 12 months and 81% now having a dedicated cyber specialist in place
- City firms improve lock-up to 135 days, while regional firms report a modest improvement of two days to 140 days
- Over 80% of firms now have a net zero plan in place or expect to implement one soon – an increase from 62% last year
- Average headcount increase of 3.73% signals commitment to investing in people
- Private equity interest remains strong but concrete investment is still yet to fully take off
Inflation impact highlighted by City and regional profit pool divide
Crowe’s report reveals that City law firms are outperforming their regional counterparts, with partner profit pools rising 12.12% despite mounting cost pressures.
This suggests that City firms have maintained tight control over their cost bases, possibly through operational efficiencies, technology adoption, and disciplined resource management.
By contrast, regional firms saw a 10.82% decline, highlighting that fee growth is no longer sufficient to offset inflationary pressures and increased infrastructure investment.
City firms also improved their lock up by 13 days to 135 days, while regional firms saw a modest two day improvement to 140 days. This indicates that metropolitan firms are converting work into cash more effectively than regional firms.
While Work in Progress (WIP) days have remained stable, a reduction in debtor days suggests that firms are becoming more effective in cash collection and credit control. WIP days for City firms remain at 35 days, compared to 71 days for regional firms.
Meanwhile, debtor days for City firms stand at 101 days, while regional firms report 70 days. Interestingly, this indicates that City firms are quicker to issue bills, whereas regional firms are more efficient at collecting payments – perhaps reflecting a greater need for cash to support their cash flow.
Despite inflation, revenues and fees per partner continue to increase
Despite inflation sitting at 3.8%, nearly double the Bank of England’s 2% target, revenues increased by an average of 10.84% across all firms.
Regional firms saw the bigger growth here of 12.21% compared to 10.19% for city firms. Firms have a positive outlook for the future, too with 35% looking for more than 10% growth in the current year.
The upward trend in fees per partner has continued this year, with firms reporting an average increase of 7.05%. City firms led the way, recording an 8.2% increase, bringing average fees per partner to £1.3 million.
This growth is likely driven by their involvement in complex, high margin work such as corporate transactions, regulatory advisory, and international disputes. Their client base, often comprising large corporate and financial institutions, has shown resilience and continued appetite for premium legal services. Regional firms, while also seeing positive movement, experienced a lower increase of 6%, with average fees per partner rising to £1.1 million.
The rise of cyber incidents prompts rise in cyber specialists
The survey also shows cybersecurity remains a top priority for UK law firms, as 22% of firms surveyed have experienced a cyber incident in the past 12 months alone. 81% of firms have dedicated cyber specialists in place, reflecting a clear shift toward proactive risk management and internal capability building.
Four in five law firms have net zero plans
Over 80% of firms now have a net zero plan in place or expect to implement one soon – an increase from 62% last year. This reflects growing awareness of the legal sector’s role in addressing climate change and the importance of aligning with client and societal expectations.
Sue Daye, Partner, Professional Practices & Private Clients at Crowe, said: “The legal sector continues to show strength and resilience, with solid financial foundations and optimism for achieving future growth targets.
“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. Investing in shoring up defences against cyber attacks is a priority, alongside carefully managed adoption of new technologies and artificial intelligence tools.
“The next big trend disrupting the sector is private equity investment. PE interest in the sector remains high, as firms are viewed as scalable and investable businesses. 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.”
Tim Kidd, Chief Executive, the Institute of Legal Finance & Management (ILFM), added: “We’re pleased to once again collaborate with Crowe on this important and insightful report. The findings show that the legal sector continues to demonstrate resilience in the face of rising costs and shifting client expectations. We are grateful to our members who have participated and shared valuable insights, which enable to us to provide a timely temperature check of the legal industry.”
Read the full report here.
