TheCityUK’s UK Legal Services 2016 report, released today, shows continued financial growth for UK-based legal services firms, with gross fees up 1.3% to a record £30.9bn in 2014/15 – the fifth successive year of growth against a backdrop of significant structural reform.
The sector’s trade surplus has nearly doubled over the past decade to £3.4bn in 2015, while the sector’s contribution to the UK economy increased to a record £25.7bn in 2015 (1.6% of GDP).
According to TheCityUK estimates, the UK accounts for around 10% of the global market for legal services, second only to the US. It is also the largest market in Europe, accounting for around a fifth of its legal services fee revenue.
The UK is the world’s most international market for legal services and the virtually unrestricted access it offers foreign firms has seen over 200 foreign law firms from around 40 jurisdictions establish offices here, as well as the main base of operations of two of the four largest international law firms, based on headcount. The UK is also the leading international centre for dispute resolution – some 70% of claims in the Admiralty and Commercial Courts in H1 2016 were international in nature. In addition, over 22,000 commercial and civil disputes were resolved through arbitration, mediation and adjudication in the UK in 2015.
Chris Cummings, Chief Executive, TheCityUK, said,
The UK is the leading global centre for the provision of international legal services and dispute resolution, employing over 314,000 people and bringing significant benefits to the wider economy. Securing this position should be a priority for the forthcoming Brexit negotiations. This means maintaining the strongest possible trading links with the EU and beyond and ensuring the UK remains a globally attractive place in which and from which to do business.
Other areas for attention should also include focusing on innovation and infrastructure investment to reduce the cost and improve the speed of litigation in the UK, ramping up efforts to export UK legal and regulatory standards to emerging markets and continuing to remove overseas barriers to trade in legal services.
The report highlights the significant restructuring across the industry over recent years, with newer entrants to the market – including the major accountancy firms, innovative smaller law practices, contract and on-demand lawyers and due diligence specialists – increasingly competing for traditional law firms’ business. In 2014/15, mid-tier and niche firms continued their robust performance for the third year running, with firms ranking 25-50 by revenue seeing a 6% increase, and those in the top 25 seeing a slight decline.
Mr Cummings concluded,
These changes are accelerating the need for law firms to innovate and reconsider their offering and potential client base. We’re also seeing an increasing number of large firms choosing to locate operations in cities across the UK to take advantage of the skilled workforce and lower labour costs. These trends are important to support and, alongside ensuring a good deal for UK financial and related professional services in the EU negotiations, will ensure that the UK continues to be seen as a genuinely competitive and world leading place to do business.