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UK Legal Services Market

UK Legal Services Market

EXECUTIVE SUMMARY
This is the 8th annual edition of the UK Legal Services Market report which provides a market review of the UK legal services market.

The UK legal services market (including private practice firms, barristers, patent agents, and other legal services providers) was valued at an estimated £32.7bn in 2017 and this is an increase of 3.8% on the market value of £31.5bn in 2016.

There are around 12,000 law firms in the UK, and 10,408 in England and Wales at the end of 2017. The overwhelming majority of law firms - 85% - are small firms with four or less partners but the top 200 law firms account for over 50% of private practice revenues generated in the UK.

Revenue growth for the top 200 firms outperformed growth in the legal market overall partly because most of their work is in the corporate sector which is performing better than most consumer law sectors and partly because a significant percentage of their revenue comes from overseas.

The introduction of the Legal Services Act 2007 in 2011 started to change the market landscape. Seven years on, the number of law firms has not fallen significantly but many have reduced costs, and staffing, while some have dropped under-performing practice areas. This is a response to some new competition, and client demands for more flexible services and pricing.

Business models for law firms have changed over the last decade. By the end of 2017, incorporated companies accounted for 44% of all law firms and the traditional partnership model accounted for only 17% and is still falling.

There are now over 1,100 Alternative Business Structures (ABS), the mechanism through which non-lawyers can invest in law firms and legal services. The number of ABS licensing bodies is now five with CILEx applying to become the sixth in 2017. The Solicitors Regulation Authority (SRA) still accounts for a majority of ABS.

By far the largest segment in the UK market is legal work for business and commercial affairs (including commercial property) accounting for 46% of total market revenue and most of the high-value work in this segment is undertaken by the larger law firms. The largest consumer law segments are personal injury/accident/medical negligence work, and family law, contributing an estimated 11% and 7% respectively of UK market revenue.

Two more UK law firms joined the Alternative Investment Market (AIM) in 2017 bringing the total of listed UK law firms to three, and M&A activity amongst some of the larger UK law firms continued to focus on developing a greater international presence, with a number of transatlantic mergers in particular. There is still consolidation in core UK consumer legal markets, led by residential conveyancing and personal injury.

As law firm numbers have stabilized, the number of solicitors with practising certificates in England and Wales continues to increase. Their numbers reached 139,797 by December 2017, an increase of 2.7% through the year. The number of barristers in England and Wales is also increasing year-on-year.

This year’s report includes the second annual set of results from a survey of 150 legal practitioners working in four consumer law areas: conveyancing; family law; personal injury; wills and probate. Over the last year, the majority of those working in consumer law have experienced volume growth in their practice areas. There are variations – seven out of 10 in family law have seen volume growth but only 40% in personal injury. Overall, 58% experienced revenue growth, a slight improvement on 55% in last year’s survey.

Looking ahead to the next 12 months, 65% are expecting to witness revenue growth in their practice area, an improvement on 2016. 77% of family law practitioners are expecting revenue growth.

As in 2017, the personal injury market continues to be the consumer legal market facing the greatest pressure with further regulatory changes due in 2019 likely to take more work away from legal advisers. Most other consumer legal sectors will see some growth. Brexit uncertainty continues to be a concern for corporate law firms.

Our revenue growth forecast for UK legal services market in 2018 is 4.2%, an improvement on 2017. In 2019 and 2020, market growth is forecast to be even stronger with the total market value forecast to reach over £40bn by 2021. Corporate law will continue to drive market growth.

In the next year or so, and leaving Brexit aside, the two factors that are likely to have a major impact are IT innovation, and calls for price transparency. The former is not just about artificial intelligence (AI) which, despite all the media coverage, has yet to be used extensively in the legal sector. It is important for firms of all sizes to explore IT innovation such as CRM system improvements, new ways of working, improved client-facing portals, IT to aid mobile working and so on. These IT improvements will not only help to manage costs and improve efficiency but also create client-centric solutions that will help to differentiate one law firm from another.


EXECUTIVE SUMMARY
UK LEGAL MARKET TIMELINE
MARKET STRUCTURE
Most legal advisers are regulated
Legal services sector split
Law firm numbers stabilising
Personnel numbers
MARKET DEVELOPMENTS
Brexit uncertainties still here
The brave new world of price transparency
MoJ response to CMA recommendations
Government review of LASPO
Freelance solicitors on their way?
Flexible and temporary lawyers on the increase, and international expansion
Business and Property Courts launched
Courts reform gathers pace
Technology as a differentiator, and AI use growing
Most SME law firms not prepared for AI
ABS sector – more licensing bodies and over 1,100 ABS
THE KEY PLAYERS
The Top 100
The Top 10
Acquisitions and mergers
Top 5 UK Law Firms – Profiles
Selected Other Legal Services Providers
Consumer Law Firms
MARKET SIZE AND TRENDS
Growth returns to the legal market in 2017
UK is a net exporter of legal services
MARKET SEGMENTATION
Corporate, financial and commercial law
Personal injury
Commercial and residential property, including conveyancing
Wills, trusts and probate
Family law
Employment law
Criminal law
PRACTITIONER RESEARCH
Volume growth for a majority but not in personal injury
Improvements in revenue growth and prospects across all segments
THE FUTURE
Still an uncertain future
Forecasts
PROFESSIONAL BODIES AND REGULATORY AUTHORITIES

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