Revenues up, but risks rising: Firms grapple with AI and cybersecurity

UK law firms are riding momentum in their top-lines, but the story behind partner pay is revealing.

According to a new industry survey, revenues rose nearly 11% on average last year, with regional firms slightly ahead at 12% and City firms around 10%. The findings come from audit firm Crowe’s Law Firm Benchmarking report for 2025, based on data from 43 law firms.

Partner profits

The headline numbers, however, tell only half the story.

City firms saw partner profit pools increase by more than 12%, suggesting tight control of costs. Regional firms, by contrast, reported a nearly 11% decline in partner profits despite their revenue gains.

Crowe said the divergence points to rising costs not offset by revenue gains - including salary inflation and office overheads - for regional players. "It also underscores the challenges regional firms face in balancing growth with profitability, particularly in a market where clients are more price-sensitive and competition is intensifying," the report said.

AI and cybersecurity

Despite the hype, most law firms remain cautious about AI.

The survey found that 73% of firms still lack a clear strategy or vision for how AI can enhance their practice. Concerns around client confidentiality and data protection remain barriers to adoption.

Cybersecurity, meanwhile, has firmly moved to the top of the agenda.

Over the past year, one in five law firms experienced a cyber incident. More than 80% now have a dedicated cybersecurity specialist, and the vast majority plan to increase spending in the coming year, likely targeting threat detection, incident response, and secure cloud infrastructure.

The report urges firms to remain vigilant: "This includes not only investing in robust technical defences but also ensuring that their people are educated and alert to potential risks."

The private equity question

For all the noise around private equity circling the legal industry, the impact is yet to materialise.

None of the firms surveyed reported PE backing. though Crowe suggested this could change as external investment moves further upmarket: "Larger firms may also begin to explore alternative ownership models if the strategic benefits become too compelling to ignore."

Strength and resilience the takeaway

Commenting on the survey results, Nicky Owen, head of professional services at Crowe, said: "The legal sector continues to show strength and resilience, with solid financial foundations and optimism for achieving future growth targets."

She added that private equity remains a looming force: "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."