Overview
For the 2026 edition, we invited firm leaders to share their perspectives on the biggest challenges and opportunities they anticipate for the year ahead.
The survey draws on insights from 121 law firms across England and Wales, with a combined fee income of over £1.2 billion – an average of £9.9 million per practice.
The key findings reveal strong growth, improved operational performance and reduced lock-up.
Despite concerns around cyber security and staffing costs, firms that keep their underlying business running well continue to perform strongly.
The survey is written and produced by the legal team at Hazlewoods LLP for our Leadership and Management Section and is sponsored by Lloyds Commercial Banking.
Key Findings
1. Fee income growth at a 15-year high
Firms are experiencing their highest growth in more than 15 years.
The sector has seen a significant uplift in median fee practice income, up 11.2%. This is almost double the previous year’s increase (6.1% in 2024).
Of participants surveyed, 85% reported year-on-year growth in fee income.
More than half of firms grew by 10% or more and over a fifth growing by 20% or more.
2. Profitability continues to rise
Productivity remains the sector’s most powerful profit lever.
Higher chargeable hours, lower overheads and reduced lock-up are all contributing to stronger financial performance.
The median number of chargeable hours recorded per fee earner was 807, up from 756 in 2024.
The median spend on non-salary overheads per fee earner was £46,916 compared with £47,098 in 2024.
As a proportion of fee income, non-salary overheads decreased to 28.4% (from 31% in 2024).
Total year end lock-up days (work in progress and debtors combined) decreased to 134 days from 146 days in 2024 (excluding unbilled disbursements).
When unbilled disbursements were included, this decreased to 144 days from 156 days in 2024.
3. Cyber security is the defining challenge for firms
Leaders are increasingly focused on the operational, financial and regulatory risks posed by cyber threats.
This follows high-profile incidents such as the Legal Aid Agency data breach.
While firms consider how to best adopt emerging technologies, concerns relating to artificial intelligence (AI) now account for 12% of total risk identified.
The ongoing rise in IT costs has been the main factor behind an increase in non-salary overheads, driven by consolidation in the software supplier market and increasing AI spend.
4. Regulatory considerations
The question of why or how law firms hold onto client money is a top concern for firms.
Existing and potential SRA regulatory requirements represent 18% of total concern, reflecting the ongoing scrutiny of client money, high-volume claims work and governance standards.
Client interest accounts form far less of the total profitability increase than in previous years. This is an encouraging statistic given the importance of core legal services driving performance.
Profitability per equity partner excluding interest grew by 10.5% in 2025.
5. Recruitment and retention pressures
Recruitment and retention pressures, rising employment costs and the increased national insurance contribution (NIC) threshold make up almost a third of all concerns raised by firms.
The median cost of a fee earner fell by 0.4% to £70,551 per fee earner, compared to £70,867 in 2024.
But the median spend on support staff, including secretaries, reception, HR, finance and back-office functions, was £27,061 per fee earner, compared to £25,655 in 2024.
How you can use the survey
“The survey is a highly valuable tool for firms to benchmark their performance and identify key areas of focus for growth and efficiency gains,” says Martyn Kendrick, UK head of legal and professional services at Lloyds Business and Commercial Banking.
“Firms that perform well do so because they have maintained discipline in the core operational drivers of a sustainable legal business,” says Abby Winkworth, Leadership and Management Section chair.
This includes “productivity, pricing, cost control, cash management, client service, people management and leadership capability”.
“Whether the topic is time recording, billing behaviour, support staff deployment, overheads or working capital the message is consistent,” she adds.
“Small, incremental improvements, applied consistently, compound into meaningful gains.
“I encourage you to engage with the survey in detail, to share it with your leadership teams and to use it as a practical tool to refocus discussion on what really drives performance.”
