Anderson: Remarkably resilient sector
The top 100 law firms continue to grow, but the gap between the top 10 and rest is widening, while disruptive competitors may be a “strategic blind spot”, PwC has warned.
“The largest firms continue to pull away from the rest, harnessing the compounding advantages of scale, international reach and operational leverage, while mid-size firms confront mounting structural headwinds,” said the accountants’ 35th annual survey of the top 100.
“The foundations on which success was traditionally built are shifting, and not all firms are shifting with them.”
The top 10 firms have increased their share of the top 100’s fee income from 45% to 51% in the last two years, at the expense of the rest of the top 50.
Firms ranked 26-50 were aiming to replicate the scale, international footprint and investment of the largest firms “but have been unable to achieve those ambitions to date”, said PwC. As a result, their profit margin was shrinking.
The smaller firms in the top 100, however, were investing in sector or practice specialisms to build expertise and competitive advantage “without the geographic investment required by larger firms”.
“Growth remains the overriding strategic ambition. Firms speak with conviction about gaining market share through sector specialisation, distinctive capabilities, and targeted expansion. Yet aspiration and execution are not the same thing.”
The top 50 firms grew but not by the 9-10% they were hoping for, but the bottom 50 hit 9.4% on average, ahead of expectation.
The top 10 firms recorded the strongest like-for-like increase in profits per equity partner, at 10.3%, to £1.82m.
Average fees per chargeable hour rose across every segment, by between 2.6% and 6.6%. Top 11-25 (£381 in fees per chargeable hour) and top 26-50 firms (£308) recorded strong rate increases, “but these did not translate into equivalent profit growth, suggesting that operational efficiency, utilisation and cost discipline are decisive levers of profitability”.
The top 10 generated £509 in fees per chargeable hour and the firms ranked 51-100 £264.
Firms have “moved on from a period of experimentation” with AI, but while two-thirds have implemented it, only 8% reported monetised benefits.
Top 100 firms now estimate that around 18% of chargeable hours could ultimately be saved through AI, up from 16% last year, “a modest but telling upward shift in confidence”.
The report said: “The gap between AI’s promise and its delivered impact remains considerable, restrained by shortcomings in data infrastructure, training, measurement, and operational integration.
“All of which are compounded by a deeply human reluctance to step away from the familiar comfort of the billable hour.”
This reflected “a real and growing risk that firms simply layer new technology on old ways of working, without fundamentally rethinking how legal services are delivered, priced or managed”.
Further, most firms (84%) were concerned about the speed of technological change, while 68% feared that clients would automate work and reduce their reliance on external counsel, or put pressure on rates.
However, PwC observed: “Despite AI and client insourcing being key concerns, only 30% of top 100 firms are concerned about disruptive competitive models. Given the potential for private equity-backed and alternative structure providers to combine technology, capital and different delivery models, this may be a strategic blind spot.”
Following several large-scale transactions in 2025, appetite for transformational mergers was “cooling”, the report went on.
“Firms are favouring lateral hiring and selective acquisitions over larger-scale strategic bets. This reflects enduring ambition tempered by a growing reluctance to commit capital and leadership attention beyond the most immediate horizon.”
Partner funding remained “the cornerstone of law firm capital structures”, and there were signs that top 10 firms “are retaining more partner cash in the business while selectively using external finance”. This is still largely from the banks.
PwC continued: “Although capital investment requirements are rising, large firms’ appetite for external investment remains muted. Instead, some are considering ring-fenced subsidiaries to attract capital without opening the wider partnership to external ownership.”
Mark Anderson, global professional and business services sector leader at PwC UK, said: “The UK legal sector remains remarkably resilient, despite a challenging macroeconomic environment. Economic uncertainty, geopolitical volatility and rising costs present an ongoing challenge for firms.
“However, resilience is not being achieved evenly and the performance gap between winners and losers is stark.”
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