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The top 10 UK law firms are charging clients almost 40 per cent more per hour than they were five years ago, a survey has found, as inflation and the growth of US firms in London pushed up fees.
The biggest UK-headquartered firms by revenue charged an average of £449 per hour in 2024, compared with £321 in 2019, according to PwC’s annual law firm survey published on Monday, with double-digit growth in average rates across the whole of the top 100 UK firms.
The increase in hourly pricing came as the 10 biggest firms notched up more billable hours at every level from trainee to partner, as lawyers benefited from a pick-up in deals and a busy litigation market last year. That resulted in UK fee income for the most recent financial year rising by an average of 11.6 per cent in the top group.
The group of UK-based international firms surveyed by PwC has been grappling in recent years with high inflation and a renewed war for talent, driven by the expansion of wealthy US firms in London. That pressure has triggered a sharp rise in salaries, as international firms based in the City try to remain competitive.
However, one upside of heavy US investment in the UK capital has been an increase in rates. US firms tend to charge more per hour than British firms, which has allowed UK outfits to increase their prices. According to recruiters, US firms now charge more than $2,000 an hour at the top end, while top partners at their UK rivals are charging more than £1,000 an hour.
“The UK’s top 10 law firms have successfully increased rates . . . through a combination of increasing specialist services, inflation and the post-pandemic boost to the corporate and deals market,” said Mark Anderson, PwC’s global legal and professional services sector leader.
“The influence of US firms building teams in London has also been a key factor,” Anderson added.
Anderson cautioned, however, that while rates remain below top-tier US firms on average, the pace of growth will be hard for UK firms to sustain. Clients are likely to push back against any steep increases as they attempt to manage their own costs.
Meanwhile, firms’ salary costs are on the rise — UK “magic circle” outfits Freshfields Bruckhaus Deringer, Linklaters, Clifford Chance, A&O Shearman and Slaughter and May all increased salaries for newly qualified lawyers by 20 per cent this year to £150,000.
PwC found that cyber risks were the number-one concern for law firms this year, with 90 per cent of the 100-strong group either extremely or somewhat concerned about it. The response signalled a change from last year when macroeconomic volatility was the top issue.
Law firms are an attractive target for hackers due to the large amounts of data they hold. Legacy Allen & Overy, now A&O Shearman, suffered a cyber attack on its systems last November, which was attributed to the hacking group LockBit.
Firms are also investing heavily in artificial intelligence, with almost 90 per cent of the top 100 outfits stating that they have trialled or implemented generative AI tools, compared with 55 per cent in 2023, the report found.
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