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Legal Services - UK - May 2019

“The UK legal services industry is forecast to show more moderate annual growth than in recent years, due to projections for lower economic growth, lower volumes of housing transactions, and slower growth in exports of legal services. However, continuing work relating to regulatory changes after Brexit will provide a positive impetus for the sector in the foreseeable future.”
– Claudia Preedy, B2B Analyst

This Report looks at the following areas:

  • Legal services providers face competition from accountancy firms
  • Legal services sector under increased pressure to adopt Lawtech

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
      • Executive Summary

          • The market
            • Legal services market shows robust performance over 2017 and 2018
              • Figure 1: Turnover of UK legal services industry, 2014-18
            • Increased demand for more diverse and non-traditional legal services
              • Investment in cutting-edge technology set to remain key priority for legal services providers
                • But legal services sector has been slow in adopting Lawtech
                  • Turnover of UK legal services industry set for moderate annual real-terms growth to 2023
                    • Figure 2: Forecast turnover of the UK legal services industry, 2019-23
                  • Companies and brands
                    • Nearly half of law firms set up as corporate entities
                      • Figure 3: Breakdown of solicitor firms in England and Wales, March 2019
                    • Increased focus on tight cost control sees providers expand use of low-cost hubs
                      • What we think
                      • Issues and Insights

                        • Legal services providers face competition from accountancy firms
                          • The facts
                            • The implications
                              • Legal services sector under increased pressure to adopt Lawtech
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Legal services market shows robust performance over 2017 and 2018
                                      • Providers need to become more efficient as clients expect better value and fixed prices
                                        • Investment in cutting-edge technology set to remain key priority for legal services providers
                                          • Turnover of UK legal services industry set for moderate annual real-terms growth to 2023
                                          • Market Size

                                            • Overview
                                              • Legal services market shows robust performance over 2017 and 2018
                                                  • Figure 4: Turnover of the UK legal services industry, 2014-18
                                                  • Figure 5: Turnover of UK legal services industry, 2014-18
                                                • UK legal services sector enjoys strong position in the global market
                                                  • The rise in alternative legal services providers
                                                    • New business models evolve in response to market liberalisation, increased price pressure and changing customer demands
                                                      • Large accountancy firms present threat to mid-market legal services firms
                                                      • Market Segmentation

                                                        • Market segmentation by profession
                                                          • Solicitors account for the majority of turnover in the UK legal services sector
                                                            • Figure 6: Turnover of UK legal services industry, by type of business, 2014-18
                                                          • Segmentation by category of work (solicitors only)
                                                              • Figure 7: Turnover of UK solicitor firms, by type of work, 2018
                                                              • Figure 8: Turnover of UK solicitor firms, by type of work, 2018
                                                            • Private practices face increased competition from in-house teams
                                                              • Demand for legal services by end-use sector
                                                                • Figure 9: Top sources of business demand for legal services, (% of total UK business sales)
                                                              • Conveyancing market
                                                                  • Figure 10: Average number of transactions by conveyancing firms, 2015-18
                                                                • Wills and probate
                                                                  • DIY probate gains in popularity, but opportunities for professionals remains
                                                                      • Figure 11: Grants of probate issued in England and Wales, 2013-18
                                                                    • Over half of adults in the UK have yet to make a will
                                                                      • Solicitors continue to dominate the will-writing market, but DIY and online will-writing services gain in popularity
                                                                        • Law Commission consults on ways to make it easier for people to make wills and to pave way for electronic wills
                                                                          • Personal injury
                                                                            • Major reforms to drive consolidation and restrict market growth
                                                                              • Other areas of work
                                                                                • Employment law
                                                                                  • Family law
                                                                                    • Regional analysis
                                                                                      • Figure 12: Regional analysis of the UK legal services sector, 2017
                                                                                    • Overseas trade in legal services
                                                                                        • Figure 13: International trade in legal services, 2013-17
                                                                                        • Figure 14: Net exports of legal services, 2008-16
                                                                                    • Market Forecast

                                                                                      • The market 2019-23
                                                                                        • The impact of Brexit
                                                                                          • Turnover of UK legal services industry set for moderate annual real-terms growth to 2023
                                                                                              • Figure 15: Forecast turnover of the UK legal services industry, 2019-23
                                                                                              • Figure 16: Forecast turnover of the UK legal services industry, 2019-23
                                                                                          • Market Trends

                                                                                            • Increased demand for more diverse and non-traditional legal services
                                                                                              • Trend towards unbundling of legal services requires providers to develop new service delivery models and invest in new skills
                                                                                                • Clients expect better value and fixed prices
                                                                                                  • Legal services providers face competition from accountancy firms
                                                                                                    • Growth in DIY law set to continue
                                                                                                    • Lawtech Adoption in the Legal Services Sector

                                                                                                      • Investment in cutting-edge technology set to remain key priority for legal services providers
                                                                                                        • ‘Big four’ at forefront in investing in Lawtech….
                                                                                                          • …while traditional providers are slow to adopt efficiency-promoting technology
                                                                                                            • Thriving Lawtech start-up activity, especially in London
                                                                                                              • Adoption of Lawtech will increase demand for new types of skills
                                                                                                                • Blockchain in the legal sector
                                                                                                                • Regulatory and Legislative Changes

                                                                                                                  • Industry regulation
                                                                                                                    • Legal Services Act
                                                                                                                      • Legal Services Act opens up market to non-lawyers and leads to the creation of new business models
                                                                                                                        • SRA relaxes the Separate Business Rule, making it easier for solicitors to provide other professional services
                                                                                                                          • SRA gives green light to freelance solicitors and solicitors in unregulated firms
                                                                                                                            • CMA concludes that the legal market is not working well for consumers and small businesses
                                                                                                                              • CMA sets out package of measures aimed to help customers better navigate the market and get value for money
                                                                                                                                • SRA makes published prices for certain legal services mandatory
                                                                                                                                  • Legal Aid, Sentencing and Punishment of Offenders Act results in significant cuts in legal aid funding
                                                                                                                                    • Government publishes post-implementation review of LASPO
                                                                                                                                      • Court modernisation programme will introduce new technology, working practices and shrink the court estate
                                                                                                                                        • Steep rise in court fees could discourage people from bringing legitimate cases
                                                                                                                                          • Government proposes controversial reforms to probate fees
                                                                                                                                          • Market Drivers

                                                                                                                                            • Residential and commercial property transactions
                                                                                                                                              • Figure 17: UK residential property transaction completions, by country, 2014-18
                                                                                                                                              • Figure 18: UK residential property transaction completions, 2014-18
                                                                                                                                              • Figure 19: UK non-residential property transaction completions, by country, 2014-18
                                                                                                                                              • Figure 20: UK non-residential property transaction completions, by country, 2014-18
                                                                                                                                            • Trends in M&A activity
                                                                                                                                              • UK M&A market remains resilient despite uncertain economic and political backdrop
                                                                                                                                                  • Figure 21: Mergers and acquisitions involving UK companies, 2005-18
                                                                                                                                                • Number of listed companies on a downward trend
                                                                                                                                                  • Figure 22: Number of main market and AIM listed companies, 2008-18
                                                                                                                                                  • Figure 23: Number of main market and AIM listed companies, 2010-18
                                                                                                                                                  • Figure 24: Number of company IPOs on London Stock Exchange, 2012-18
                                                                                                                                                • Rise in active businesses as UK economic recovery becomes more robust
                                                                                                                                                    • Figure 25: Number of private sector businesses in the UK, 2004-18
                                                                                                                                                    • Figure 26: Number of private sector businesses in the UK, 2004-18
                                                                                                                                                    • Figure 27: Number of VAT and/or PAYE registered enterprises in the UK, by industry group and turnover size band, 2017, (Number and £000)
                                                                                                                                                • Companies and Brands – What You Need to Know

                                                                                                                                                  • Changing customer demand leads to emergence of innovative business models
                                                                                                                                                    • Increased focus on tight cost control sees providers expand use of low-cost hubs
                                                                                                                                                      • HSF’s global alternative legal services business offers cost efficient legal products and technology services for clients
                                                                                                                                                        • Clifford Chance launches Tech Group to help businesses in all industries tackle the risks and opportunities that technology brings
                                                                                                                                                          • Linklaters enhances cross-border aspects and integrates multi-practice teams in response to the growing international needs of clients
                                                                                                                                                            • Legal services providers become more sector-focussed
                                                                                                                                                            • Industry Structure

                                                                                                                                                              • Industry development
                                                                                                                                                                • International legal services firms in London
                                                                                                                                                                  • Top 20 commercial legal firms
                                                                                                                                                                      • Figure 28: UK top commercial law firms, by turnover, 2018
                                                                                                                                                                    • The rise of alternative legal services providers
                                                                                                                                                                      • Structure of UK legal activities industry
                                                                                                                                                                        • Figure 29: Analysis of the changes in the structure of the UK legal activities industry, 2014-18, (number of local units and businesses)
                                                                                                                                                                      • Solicitor firms
                                                                                                                                                                          • Figure 30: Number of practising solicitors in the UK, 2011-17, (number and % change)
                                                                                                                                                                          • Figure 31: Population of practising solicitors, 2014-19
                                                                                                                                                                          • Figure 32: Breakdown of solicitor firms, by type, March 2014 and February 2019
                                                                                                                                                                        • Practising barristers
                                                                                                                                                                          • Figure 33: Total barristers in practice, 2013-18
                                                                                                                                                                        • Structure by employment
                                                                                                                                                                          • Figure 34: Analysis of the employment structure of the UK legal activities industry, 2017 and 2018, (local units and employees)
                                                                                                                                                                        • Structure by turnover
                                                                                                                                                                          • Figure 35: Analysis of the financial structure of the UK legal activities industry, 2017 and 2018, (£ 000 and number of companies)
                                                                                                                                                                      • Company Profiles

                                                                                                                                                                        • Allen & Overy
                                                                                                                                                                          • Company strategy
                                                                                                                                                                            • Advanced Delivery
                                                                                                                                                                              • Harnessing technology and innovation
                                                                                                                                                                                • Financial performance
                                                                                                                                                                                  • Figure 36: Financial analysis of Allen & Overy, 2014-18, (£ million)
                                                                                                                                                                                • Clifford Chance
                                                                                                                                                                                  • Company strategy
                                                                                                                                                                                    • Clifford Change launches new technology group to advise clients on the risks and opportunities that technology brings
                                                                                                                                                                                      • Financial performance
                                                                                                                                                                                        • Figure 37: Financial analysis of Clifford Chance, 2013-17, (£ million)
                                                                                                                                                                                        • Figure 38: Turnover analysis of Clifford Chance, by geographic segment, 2018 (% of turnover)
                                                                                                                                                                                      • CMS Cameron McKenna Nabarro Olswang
                                                                                                                                                                                        • CMS combines with Nabarro and Olswang in largest ever merger in UK legal services market
                                                                                                                                                                                          • Financial performance
                                                                                                                                                                                            • Figure 39: CMS Cameron McKenna Nabarro Olswang, 2014-18 (£000)
                                                                                                                                                                                          • DLA Piper International
                                                                                                                                                                                            • DLA Piper announces launch of blockchain and digital assets practice
                                                                                                                                                                                              • Company strategy
                                                                                                                                                                                                • Financial performance
                                                                                                                                                                                                  • Figure 40: Financial analysis of DLA Piper International, 2013-17, (£ million)
                                                                                                                                                                                                • Freshfields Bruckhaus Deringer
                                                                                                                                                                                                  • Freshfields moves support services to new global centre in Manchester
                                                                                                                                                                                                    • Company strategy
                                                                                                                                                                                                      • Financial performance
                                                                                                                                                                                                        • Figure 41: Financial analysis of Freshfields Bruckhaus Deringer, 2014-18, (£ million)
                                                                                                                                                                                                      • Herbert Smith Freehills
                                                                                                                                                                                                        • New global alternative legal services business launched in 2015
                                                                                                                                                                                                          • Beyond 2020 global strategy
                                                                                                                                                                                                            • Financial performance
                                                                                                                                                                                                              • Figure 42: Financial analysis of Herbert Smith Freehills, 2013-17, (£ million)
                                                                                                                                                                                                            • Hogan Lovells International
                                                                                                                                                                                                              • Company strategy
                                                                                                                                                                                                                • Financial performance
                                                                                                                                                                                                                  • Figure 43: Financial analysis of Hogan Lovells International, 2014-17, (£000)
                                                                                                                                                                                                                • Linklaters
                                                                                                                                                                                                                  • Company strategy
                                                                                                                                                                                                                    • Financial performance
                                                                                                                                                                                                                      • Figure 44: Financial analysis of Linklaters, 2013-17, (£ million)
                                                                                                                                                                                                                    • Norton Rose Fulbright
                                                                                                                                                                                                                      • Merger with US-based Chadbourne & Parke
                                                                                                                                                                                                                        • Company strategy
                                                                                                                                                                                                                          • Financial performance
                                                                                                                                                                                                                            • Figure 45: Financial analysis of Norton Rose Fulbright, 2014-18, (£000)
                                                                                                                                                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                                            • Abbreviations
                                                                                                                                                                                                                              • Methodology
                                                                                                                                                                                                                              • Further Sources and Contacts

                                                                                                                                                                                                                                • Regulatory bodies and professional associations
                                                                                                                                                                                                                                  • Advocate General for Scotland
                                                                                                                                                                                                                                    • Solicitors Regulation Authority
                                                                                                                                                                                                                                      • The Bar Council
                                                                                                                                                                                                                                        • The Commercial Bar Association
                                                                                                                                                                                                                                          • The Law Society
                                                                                                                                                                                                                                            • The Law Society of Northern Ireland
                                                                                                                                                                                                                                              • The Law Society of Scotland
                                                                                                                                                                                                                                                • The Sole Practitioners Group
                                                                                                                                                                                                                                                  • Trade magazines
                                                                                                                                                                                                                                                    • Lawyer Monthly
                                                                                                                                                                                                                                                      • Legal Business
                                                                                                                                                                                                                                                        • Legal Week
                                                                                                                                                                                                                                                          • New Law Journal
                                                                                                                                                                                                                                                            • Solicitors Journal
                                                                                                                                                                                                                                                              • The Journal of the Law Society of Scotland
                                                                                                                                                                                                                                                                • The Law Gazette
                                                                                                                                                                                                                                                                  • The Lawyer
                                                                                                                                                                                                                                                                    • Trade events
                                                                                                                                                                                                                                                                      • LAW 2019
                                                                                                                                                                                                                                                                        • London Law Expo ‘19
                                                                                                                                                                                                                                                                          • Legalex 2019

                                                                                                                                                                                                                                                                          Legal Services - UK - May 2019

                                                                                                                                                                                                                                                                          US $1,272.90 (Excl.Tax)