NatWest has released their eleventh legal report analysing the financial performance of law firms across the UK following a survey of 110 participants. Optimism in the legal industry remains fairly high, with the majority or 84% of firms feeling generally positive about the foreseeable future, referencing steady growth in fee income as well as overall business profitability.
However, this is still a decrease from 90% in 2024, NatWest revealed.
The report primarily focuses on firms that operate at the commercial and mid-market level across England, Scotland and Wales, with turnover “ranging from £1 million to £200 million, and an average turnover of £17 million.”
Firms surveyed reported growth in fee income and profits per equity partner (PEP), which is said to be “a common measure for law firm profitability, over the past year.”
Overall, median PEP increased by “23%, to £340,000, in 2025.”
Small firms enjoyed an increase of “8%, to £204,000, while large firms saw a significant increase of 23%, to £372,000.”
A regional breakdown shows that firms in the South-West & Wales reported the highest median “PEP of £407,000, for 2025, followed by London & the South-East (£297,000) and the North & Scotland (£283,000).”
The survey also asked companies for their expectations of fee growth in 2026, with the data indicating that 89% of firms “expect their fee income to further increase.”
David Weaver, Head of Professional and Business Services, NatWest, said:
“It’s encouraging that the legal sector has exhibited such remarkable resilience with the vast majority of firms having a strong sense of optimism about the future. Many of the firms we surveyed demonstrated strong growth in both fee income and profitability despite recent challenges, most notably margin pressures.”
Weaver also noted:
“We find that the strongest performing firms within the sector tend to focus on long-term vision, have a Future Fit mindset and prioritise some of the key areas that are commented upon within this report such as Talent, Technology and Sustainability in its widest sense.”
The report also examined fee performance by teams and found the “strongest performers” to be private client as well as residential property teams.
And 34% of respondents reported private client teams as the “most buoyant area in 2025, followed by residential property (14%) and real estate (13%).”
Companies were also asked to identify which particular areas of their business they thought could be underperforming.
Significantly, 23% had cited litigation, 22% pointed to family law, and 21% highlighted commercial and transactional work as the “weakest” performing teams during the first quarter of the 2026 financial year.
Andrew Allen, author of the report and Partner at PKF Francis Clark, said:
“This is the eleventh legal report prepared by NatWest and we are delighted to report 110 participants in this year’s survey with a good spread of firms both by size but also geographical location enabling us to give an insight into the legal sector in 2025. The combined revenue of firms in the survey exceeded £1.8bn and the average revenue of a participant firm was £17m.”
Allen added:
“Half of survey participants are actively engaged in using AI in their business, although most firms are using this for administrative activity and general matter management rather than delivering legal advice. In the NatWest 2023 survey only 2% of firms reported using AI in their business.”