£50bn. That is projected to be the value of the UK market for legal services in 2026 according to conservative estimates.
The market is highly concentrated at the top end with just 35 international firms generating 70% of revenues (£35bn). There are approximately 9,600 UK legal practices which means that 0.365% of them dominate the lion’s share of the market by value. An astonishing statistic and an amazing achievement on the part of those firms. This group of practices includes some members of the “Global Elite”, an even more concentrated club comprising the best US and UK firms.
The lower end of the market is fragmented in the extreme with 9,300 practices sharing £10bn of fees. 96.9% of UK firms account for a market share of just 20%, with the average turnover per firm at £1.075m.
This group includes so-called “high street” firms, which have long been accused of perpetuating an economic model which is inefficient. There are a thousand fewer such firms than existed 10 years ago, and further consolidation is inevitable. These firms face significant challenges including competing for talent and a high cost base, notably professional indemnity insurance. Not to mention having pockets deep enough to invest in new technology as AI develops at pace.
The middle-market, however, is rife with opportunities. Here, 265 firms (2.76% of the total) share the spoils of the remaining 10% of the market. At £5bn, this means the average turnover per firm is £19m. Together with the 35 international firms at the top of the market these practices make up the “Legal Universe 300” published annually by The Lawyer.
I serve as non-executive chair of one firm which sits in the lowest quartile of this league; I also serve, in a similar capacity, another practice which lies just outside the 300. It generates £10m of revenues. Earlier in my career, I worked with firms at the top end of this league. Therefore, I have an understanding of the relative client bases each type of firm serves.
The fact is that the 265 mid-market firms provide an invaluable service to the companies (privately held in the main) and other organisations which form the backbone of the UK economy. They are the UK legal market equivalent of what in Germany is known as The Mittelstand. Our economy could not function without these companies and they, in turn, could not flourish without our mid-market law firms.
Across the UK, well-run firms are helping to keep the wheels of commerce turning whilst also supporting organisations in the public and not for profit sectors, as well as generations of families.
As the lower end of the market continues its inevitable consolidation, the middle market will expand (perhaps to 500 practices) and mid-market firms will gain market share (15% would not be surprising).
In the process, they will strengthen further their position as a cornerstone of the UK economy.
Looking for a reason Private Equity houses are so interested in this part of the legal market? Look no further.
