Incledon: Demand has held up very well
The income of equity partners at law firms increased by 42% in the five tax years to 2022/23, more than twice as fast as barristers and that of the rest of the UK workforce, new figures show.
According to HM Revenue & Customs, self-employed solicitors in 2022/23 – numbering around 30,000 – made an average profit of £307,000 after capital allowances and losses.
In 2018/19, average profit was £216,000. Over the same period, average UK salaries grew by just 18% to £30,000, below inflation of 21% in that period.
The figures were obtained by Bowmore Wealth Group through Freedom of Information Act requests. They actually go back to 2016-17, when average profits were £195,000.
Self-employed barristers have not fared as well, however. An average profit of £150,000 in 2018/19 reached £188,000 in 2021/22, but fell back the following year to £180,000, meaning a 20% rise over five years.
Bowmore said law firm profits and those of their partners have risen as they have been able to increase their hourly rates whilst benefiting from “buoyant demand” across a number of key service lines.
Income even rose during the worst of the pandemic – although this would be in part due to cost cutting as well as the resilience of some practice areas, such as litigation and property.
Bowmore CEO Mark Incledon said: “UK law firm partners have continued to experience strong income growth. The increase in law firm payrolls, especially for associates, has not yet undermined the growth in profits. Demand has held up very well.”
Mr Incledon suggested that barristers’ income reflected more disputes concluding through alternative dispute resolution and not reaching trial. Barristers have also seen legal aid payments fall in real terms.
He added that partners should be saving and investing a higher percentage of their income than the average employee so they could ride any future economic waves.
