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UK legal services market will continue to outperform the economy

But corporate counsel will have increasing buying power

10 July 2012

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By Manju Manglani, Editor (@ManjuManglani)

The UK legal services market will continue to outperform the economy, a recent statistical analysis has found.

However, law firms will continue to face pressure from corporate counsel as a result of the shift in buying power, with legal compliance increasingly moving in-house.

Market consolidation continues to be painfully slow and there are many more law firms active now than in 1995, and also more than in 2007.

The study by RBP is based on an analysis of statistics from the Law Society of England and Wales and the Office for National Statistics.

Although the value of legal services dropped to £24.9bn in 2008, the first decline in many years, the market value had recovered to £25.5bn as of 2011.

Profits per equity partner are being maintained by an increasing reliance on assistants supporting a smaller pool of partners. The number of partners dropped from 45 per cent in 1998 to 35 per cent in 2011. The study also found that large firms have 3:1 assistant to partner ratios, while mid-market firms had 2.4:1 ratios.

There has been a steady year-on-year growth in the number of solicitors employed in private practice since 1998, at between one and three per cent. By 2011, the number of solicitors working in private practice had increased by 45 per cent to 87,973 since 1998.

A highly variable but consistent growth in the number of solicitors employed outside of private practice has also been evident since 1998. By 2011, the number of solicitors working outside of private practice had more than doubled to 33,960 and accounted for 28 per cent of all solicitors, up from 19 per cent in 1998.

There is a clear macro trend for companies to bring legal services management in-house. The number of companies employing solicitors has increased fivefold since 1998, while the number of solicitors in government has dropped by 28 per cent.

The report notes that the private practice market continues to be highly fragmented. There has been a gradual growth in the size of the larger firms (by number of fee-earners), but the pace of consolidation remains slow.

The full findings of the statistical analysis are published in Statistical Review 2012: A Review of the Key Statistics Behind the Legal Services Market in the UK.

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