The Legal Services Industry in the United Kingdom plays a crucial role in providing legal services and support to individuals, businesses, and organisations. As of 2023, there are 33,791 legal businesses in the UK, marking a modest increase of 0.3% from the previous year. This growth indicates the resilience and importance of the legal sector in the country.
Over the past five years, from 2018 to 2023, the Legal Services Industry in the UK has shown steady growth, with an average annual increase of 0.3% in the number of businesses. This positive trend highlights the demand for legal services in various sectors, including corporate law, litigation, intellectual property, and more.
However, the forecast for business growth in the industry over the next five years presents some challenges. The revenue in the industry is expected to contract at a compound annual rate of 0.1%, reaching £41.3 billion by 2023-24. This contraction can be attributed, in part, to the impact of the COVID-19 pandemic.
The COVID-19 outbreak had a significant influence on the legal industry in the UK, causing severe delays and disruptions. With the closure of courts and the suspension of cases and jury trials, law firms faced unfavourable conditions. However, the industry adapted quickly to these challenges, adopting virtual meetings and remote working to support clients with their legal needs. Larger law firms were better equipped to weather the disruptions due to their broader client base and operational scale.
When analysing the regional distribution of Legal Activities businesses in the UK, it becomes evident that London is the leading hub for legal services, housing 38 businesses. Following London, the North West and the South East regions host 11 and 10 businesses, respectively. This concentration of businesses in London can be attributed to its status as a financial and legal centre, attracting both domestic and international clients seeking legal representation and counsel.
For startup businesses in the Legal Services Industry, it is essential to be aware of the major costs involved. The industry is labour-intensive, with a greater reliance on labour than capital. Therefore, wages constitute the most significant cost for businesses, accounting for 33.9% of revenue. Additionally, purchases and rent & utilities contribute to 3% and 4% of revenue, respectively. Being mindful of these cost factors can help startups plan their financial strategies more effectively.
In terms of market share concentration, the Legal Services Industry in the UK shows a relatively low level, with no single company holding more than 5% of the market share. This indicates a diverse and competitive landscape with various law firms vying for clients across different legal sectors.
Ken Dulieu, Chairman of Capcon and Head of Capcon Argen comments:
“The Legal Services Industry in the UK remains robust and indispensable, despite challenges posed by the COVID-19 pandemic. The steady growth in the number of businesses over the past five years is a testament to the demand for legal services in the country. However, the industry faces forecasted revenue contraction over the next five years, partly due to the pandemic’s lingering effects. Startups should be cautious of the labour-intensive nature of the industry and the associated costs. As the legal landscape continues to evolve, law firms must adapt to technological advancements and changing client expectations to stay competitive in the market.
“Risk management is crucial for sustainable growth and business resilience in legal firms. By identifying, assessing, and mitigating potential risks, firms can safeguard their operations, reputation, and clients’ interests. Effective risk management ensures compliance with regulations, minimises legal liabilities, and protects against financial losses. Sustainable growth relies on making informed decisions and adapting to changing market conditions. By proactively managing risks, legal firms can enhance their ability to navigate challenges, maintain client trust, and seize opportunities for growth. Emphasising risk management fosters a culture of preparedness and resilience, enabling legal firms to thrive in a dynamic and unpredictable business environment.”
Statistics provided by IBIS World.