Average UK law firm now has 17 lawyers – up from 12 a decade ago
Soaring overheads pushing many small law firms towards consolidation with larger firms
The average UK law firm now has 17 lawyers, up from 16 last year and 12 a decade ago as the profession continues to consolidate, shows new research from accountancy firm Hazlewoods.*
Hazlewoods says the rise in the number of lawyers per firm is being driven by larger firms acquiring smaller law firms as part of their expansion plans. This comes as the number of law firm mergers increased 23% in the previous year, from 99 in 2021 to 122 in 2022.**
Whilst the number of lawyers per firm has increased, the total number of firms has dropped 13% in the previous decade, from 10,867 in 2013, to 9,498 in 2023. This has been partly driven by more law firm partners seeking consolidation with their larger competitors.***
Ian Johnson, Partner, of Hazlewoods says that he expects the trend for smaller law firms to seek mergers with larger firms to continue as they struggle with rising interest rates, overheads and stubbornly high insurance that have been driving up inflation, as well as a shortage of qualified lawyers.
Says Ian Johnson: “Law firms have been considering mergers as a way to capitalise on economies of scale in the sector that can be substantial. Law firms can look to streamline their operating costs by making sure that expensive office space is fully occupied or by sharing IT systems and other back-office functions across more lawyers.”
“Even in the area of professional indemnity insurance, economies of scale are very substantial, insurance costs per lawyer are substantially higher for smaller firms.”
Data from the SRA also shows that the percentage of all law firms that are “sole traders” are now 17% of all law firms (July 2023) down from 30% a decade ago (July 2013).
Ian Johson says that as well as expanding headcounts through mergers, law firms have been more actively trying to expand through lateral hires – and not just through hiring partners, but also looking at acquiring whole teams from competitors.
He explains that law firms have been struggling with staffing challenges for years and so also commit a lot of effort into other key strategies such as:
- Retention of high quality junior lawyers at the end of their training contracts
- Allowing partners to stay on as consultants past what would have been their natural retirement dates
Says Ian Johnson: “The war for talent is very real in the legal profession. Firms are working harder than ever – and spending more than ever – to bring in and keep good lawyers at every level.”