Witan analysis reveals legal sector struggles

A recent analysis of Companies House data by Witan Solicitors sheds light on the frailty of the legal services industry in England and Wales. The study, which examined businesses incorporated between January 2021 and December 2025, revealed that 3,572 of the 13,229 newly established legal entities, equivalent to 27%, have already ceased operations. This stark statistic highlights the challenging landscape for new firms vying for success in a competitive market.

The research also delved into specific sectors within the legal industry, identifying those experiencing the highest failure rates. Notably, firms engaged in justice and judicial activities faced the brunt of these challenges, with 140 out of 305, or 45.9%, of these businesses shutting down. Similarly, new barristers at law were not immune to the harsh realities, as 345 out of 781, or 44.2%, of them closed their doors within five years. The analysis also pointed out that patent and copyright agents along with other unspecified legal activities experienced a closure rate of 28.4%, while solicitors’ firms performed somewhat better, with only 21.8% facing closure since 2021.

In response to these revealing findings, Qarrar Somji, Director of Witan, commented, “The legal market is at a real turning point right now. For the first time in recent memory, the number of law firms in England and Wales has dropped below 9,000. We’ve lost nearly 2,000 firms over the last fifteen years, and it’s a very challenging environment for anyone trying to build something new.” He further noted that thriving in this environment requires more than legal acumen, stating, “To survive today, you need more than just legal expertise. You need serious business grit.”

Somji elaborated on the pressures facing new firms by explaining that many hit a wall due to regulatory and financial strains. “The traditional high street model is being diluted, and being the 'local' solicitor isn't the competitive advantage it used to be,” he said. He also discussed the shift away from sole practitioners, with many lawyers opting for “fee-share” or consultant models, offering better resilience against rising operational costs and leading to a trend of consolidation as private equity begins to infiltrate the sector.

Even established firms are feeling the squeeze, as Somji remarked on recent high-profile failures, stating, “In the past couple of years, we’ve seen multi-million-pound practices enter administration. While top-line earnings may be growing, rising costs like National Insurance and professional indemnity insurance are eating into profit margins.”

The rise of artificial intelligence is also reshaping the legal landscape, with some firms planning to reduce back-office and junior roles in light of automation capabilities. However, Somji cautioned that these technological advancements come with a price tag, making it difficult for smaller firms to adapt. He concluded by stating “Understandably, for a new firm, it can feel like you’re being squeezed from every side. Without a clear niche or a plan for this new tech-heavy world, the gap between making a profit and going under just keeps getting wider.”