Law firms hit 15-year growth high despite rising risks

Survey shows rising profits alongside growing cyber and cost concerns

Law firms across England and Wales have reported their strongest financial growth in more than a decade, according to the Financial Benchmarking Survey 2026.

The survey, based on data from 121 firms with a combined fee income exceeding £1.2 billion, found that 85% of participating firms experienced year-on-year growth. Median fee income increased by 11.2%, representing the highest rate of growth in 15 years.

More than half of firms reported growth of at least 10%, while over 20% achieved increases of 20% or more. The findings indicate a sector that continues to expand despite ongoing economic and operational challenges.

Profitability also improved, driven primarily by increased productivity. The median number of chargeable hours per fee earner rose to 807, up from 756 the previous year. At the same time, firms reduced overheads, with non-salary costs falling to 28.4% of fee income.

Firms also improved cash flow management, with total lock-up days covering work in progress and unpaid bills falling from 146 to 134 days. This reduction suggests more efficient billing and collection practices across the sector.

Despite these positive indicators, the survey highlights several areas of concern. Cybersecurity has emerged as a primary risk for firms, reflecting both operational vulnerabilities and the growing threat landscape. Concerns relating to artificial intelligence account for 12% of identified risks.

Rising costs also remain a challenge. While the average cost of fee earners decreased slightly, expenditure on support staff increased, and firms continue to face pressure from higher employment costs and national insurance contributions.

Regulatory compliance is another key issue. Concerns about client money handling and broader regulatory requirements now represent a significant proportion of risks identified by firms.

The survey indicates that firms maintaining strong operational discipline, particularly in areas such as pricing, cost control and cash management, are better positioned to sustain growth.

Overall, the findings suggest that while the legal sector is experiencing robust financial performance, firms must continue to manage emerging risks and rising costs to maintain stability.