A recent survey highlights that the leading UK law firms have increased their hourly charges by nearly 40 percent over the past five years. This rise has been influenced by inflation and the expansion of US firms in London. Conducted by PwC, the annual law firm survey revealed that the largest UK-based firms, in terms of revenue, charged an average of £449 per hour in 2024, up from £321 per hour in 2019. This reflects double-digit growth in average rates across the top 100 UK firms.
This increase in pricing follows a rise in billable hours across various levels, from trainees to partners within the top 10 firms, as they took advantage of a surge in deals and an active litigation market last year. Consequently, these firms saw their UK fee income grow by an average of 11.6 percent in the last financial year.
The surveyed international UK firms have been navigating high inflation and an increased competition for talent, spurred by the influx of prosperous US firms in London. This has led to a significant rise in salaries as UK firms compete to remain attractive. Despite the challenges, the presence of US firms has enabled UK firms to raise their rates, as US firms typically charge higher hourly rates. Recruitment data indicates that top US firms charge more than $2,000 per hour, with leading UK partners charging over £1,000 per hour.
Mark Anderson, PwC’s global legal and professional services sector leader, noted that the UK’s top law firms have successfully increased rates due to a combination of enhanced specialist services, inflation, and a post-pandemic boost in the corporate and deals market. He also mentioned that the influence of US firms expanding teams in London has been a significant factor.
Anderson further cautioned that although UK firms have been raising rates, maintaining this growth is challenging. Clients are likely to resist significant hikes as they strive to manage their own costs.
Additionally, salary expenses are rising, with “magic circle” firms such as Freshfields Bruckhaus Deringer, Linklaters, Clifford Chance, A&O Shearman, and Slaughter and May raising newly qualified lawyers’ salaries by 20 percent this year to £150,000.
PwC found that cyber risks have become the primary concern for law firms this year, with 90 percent of the surveyed firms expressing varying degrees of concern, shifting focus from last year’s top issue of macroeconomic volatility. Law firms, which hold large amounts of data, continue to be prime targets for hackers. A&O Shearman, formerly known as Allen & Overy, experienced a cyber attack last November by the hacking group LockBit.
Furthermore, there is a significant investment in artificial intelligence among law firms. Nearly 90 percent of the top 100 firms reported that they have tested or implemented generative AI tools, a notable increase from 55 percent in 2023, according to the report.
