Growth has failed at most top 100 UK law firms, report warns

Most of the UK’s top 100 law firms have gone backwards over the past decade despite headline revenue and profit gains, according to a detailed new report which has examined the accounts of the sector's top law firms 2014 to 2024.

The analysis, from legal advisory boutique Taha & Watmough, argues that "growth hasn’t worked" for much of the market, with 60% of firms in decline once underlying financial health is measured.

Jonathan Watmough, former managing partner of City firm RPC, and Adil Taha, a private equity executive who recently led the rescue of Rosenblatt, say headline numbers mask "a very different underlying growth story".

The metrics that matter

Nearly all top 100 firms have seen real-terms rises in revenue and profit over the past ten years. But the report points to three "crucial" measures that expose weakness beneath the surface: revenue per lawyer, profit per lawyer and profit per equity partner.

On those metrics, 60% of firms have seen their revenue per lawyer fall in real terms, reflecting declining value in the work being done. The same proportion have seen profit per lawyer shrink, suggesting worsening efficiency and rising people costs. And more than a third of firms have seen partner profits decline, leaving the average equity partner at those firms earning less today - in real terms - than ten years ago, despite a period of record client demand.

The report argues firms have managed to conceal the decline by keeping equity partnerships tight, but that the quality of work is deteriorating across much of the top 100.

Winners and losers

Performance has been strongest at the very top of the market, with the top 25 firms pulling away from those in 26th to 100th place on all three key health measures.

Among standout performers across the top 100, Shoosmiths, Addleshaw Goddard and TLT are cited as some of the best of the decade. At the top end of the market, Clifford Chance and Hogan Lovells are noted for increasing profit at almost twice the pace of their revenue growth.

What next?

The report suggests three routes for underperforming firms: a turnaround based on a "vibe-shift" in partnership culture and a deliberate move upmarket, a merger (though the authors note deals are "hard to pull off"), or a sale to outside investors, reflecting the growing appetite of private equity to buy into legal services businesses.

"The uncomfortable truth is ‘growth’ hasn’t worked," the report concludes. "Headline revenue and profit increases disguise a very different underlying growth story."