City of London: Big firms increasingly dominant
The UK must support innovation in legal services, particularly lawtech, to “foster job creation and drive economic growth across the country”, The CityUK has said.
In a report published today, the lobbying group said the top 100 UK law firms increased revenue by 8% to almost £34bn in the last financial year, making up the bulk of the £43.7bn in total revenue from legal activities in the UK recorded in 2022 (a figure up 5.6%).
The UK’s legal services sector employed around 368,000 people in 2022 – almost two-thirds of whom were based outside London, while it delivered a trade surplus of £5.7bn.
The UK has also become “a global hub” for lawtech, benefiting from “a highly developed legal market, a technology talent pipeline, a competitive tax system, a liberal regulatory regime and support for innovation by the government”.
Some 43% of all lawtech startups in Europe are based in the UK.
The CityUK went on: “The UK’s leading position is the result of an extensive network of ‘tech labs’ created by law firms, universities and others including financial services businesses. These centres of innovation are providing employment across the UK.”
Outside of the Square Mile, City law firm Ashurst has one in Glasgow, Hogan Lovells in Birmingham and Bryan Cave Leighton Paisner, Freshfields Bruckhaus Deringer and Latham & Watkins in Manchester.
Belfast is “a leading centre for legal innovation”, with lawtech firms such as Axiom, iManage and Briefed, as well as legal services centres for Allen & Overy, Baker McKenzie and Herbert Smith Freehills.
In the report Legal excellence, internationally renowned: UK legal services 2023, The CityUK said that, despite “economic challenges from inflation and high interest rates”, revenue for the UK’s top 100 firms rose by 8% to almost £33.8bn in 2022-23, a figure which had grown more than 75% over the past decade.
The revenue of the top 25 firms, at £26.4bn, now accounted for almost 80% of this.
Staff numbers at the top 100 law firms increased over the past year by 7% to 82,200, while the largest 50 foreign law firms in London increased their headcount to a record 8,569 in 2022.
The UK remained the largest legal services market in Europe and second globally only to the US. There are also more than 6,500 solicitors of England and Wales, and 800 Scottish solicitors, working abroad, while more than 2,400 barristers in England and Wales receive instructions from clients based abroad (more than double the figure a decade ago), earning more than £441m from this work.
In the face of competition from alternative legal services providers, the Big Four accountants and US firms, City law firms were having to consider changing their operating models and “increasingly turning to mergers and acquisitions to build scale, deepen specific practice experience and enter new geographical markets”.
In the UK alone, PwC has 400 lawyers, EY around 200, Deloitte around 150 and KPMG approximately 100.
Diversity in the UK legal profession was “well established but, as is the case across financial and related professional services, progress is still needed and the sector is working hard to address historical imbalances”.
The CityUK said despite making up the majority of the profession, and having done so “for many years”, female lawyers continued to be “underrepresented at senior levels”.
Another challenge was “ensuring that talented people from all backgrounds can enter the sector” and not just those from relatively privileged backgrounds.
Miles Celic, chief executive of TheCityUK, said the “continued success” of the legal sector was “crucial” for maintaining the UK’s status as a leading international financial centre.
“However, we cannot take this success for granted. To maintain its global pre-eminence in legal services, the UK’s reputation for the rule of law must be protected and enhanced.
“To foster job creation and drive economic growth across the country, the UK must support innovation in legal services, particularly within the exciting and fast-growing lawtech sector.”
Lord Chancellor Alex Chalk commented: “TheCityUK’s annual report once again highlights the extraordinary success of the UK’s legal sector and the vital contribution it makes to our economy, creating jobs and driving social mobility.
“We don’t take these achievements for granted and will continue to promote English and Welsh law, and the UK’s legal sector, around the world at every opportunity.”
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