Director Jane Gaunt looks at the complexities of the London legal market, the influence of the US firms and looks ahead at likely challenges and strategies for success.
As we find ourselves well into 2025, there’s a sense of nostalgia when reflecting on 2024. The political landscape at the start of 2024 seemed primed for change, with an almost certain shift in government looming on the horizon. This anticipation was met with a blend of optimism and concern, as the legal sector and broader economy pondered the potential impacts of the new administration’s policies.
UK Legal Market Dynamics
The UK legal market at the start of 2024 followed a similarly cautious and strategic approach as the previous year. As the year progressed, it became evident that private practice firms faced a mix of challenges and opportunities. Firms that were well-positioned to provide cost-effective solutions to clients, driven by the economic headwinds, thrived. In contrast, firms that lacked the strategic foresight and versatility struggled to show resilience.
It was a dynamic year for the legal sector, with firms adapting to new challenges and opportunities to remain competitive. Notably, there was strong performance in the mid-market with 3 mid-market firms receiving the top 3 places in the UK Firm of the Year category at the Lawyer Awards in June, Addleshaw Goddard – Winner, Shoosmiths – Highly Commended and Freeths – Commended. Catrin Griffith, Editor of the Lawyer, in the publication’s podcast series described the mid-market as “absolutely vibrant.” Deputy Editor, Richard Simmons, went on to say “real progress, real success stories, are not the ones [firms] coming out making huge grandiose statements about what they are going to do, or making what are perceived as radical, exotic bold moves. They are the ones with a plan, that are sticking to a plan doing some quite innovative things that aren’t necessarily headline grabbing, they are the ones really coming up trumps.” https://www.thelawyer.com/tag/podcast/
Influence of US Firms
The private practice market in the UK was once again heavily influenced by US firms. In line with growth in previous years, US firms in London are no longer seen as an alternative to traditional UK/international firms and have become an integral part of the UK’s private practice market. Their presence is now deeply woven into the fabric of the UK legal landscape, influencing market dynamics, especially in the context of salaries, setting new standards for client service, and contributing significantly to the overall growth and innovation within the sector. Most notably, the cross-border merger between Allen & Overy and Shearman & Sterling, to create A&O Shearman in May 2024, was a significant signal of the integration of US firms into the UK market, creating a firm that had the strength of a Magic Circle firm with the agility of a prominent US firm.
At the partner level, US firms continued to aggressively pursue top talent in London, leading to an exodus of partners from both US and UK firms. Most notably was the exponential growth of Paul Weiss, which hired a further 14 partners in London over the course of the year, from a range of firms, including: Kirkland & Ellis, Goodwin, DLA Piper, and Cleary Gottlieb. This sent a strong message, reinforcing their focus on London and allowing the firm to be “ambidextrous” in serving global clients with respect to both US and English law.
Latham, despite loosing a number of partners over the last 12 months (around 11, reported to be more than double the attrition it averaged over the previous four years) continued to enjoy an increase of turnover driven by their own external hires, a broadening of their client base and advising on some of the UK’s largest corporate deals. Sidley Austin were the major beneficiary of Latham’s departures with 7 partners joining last year, significantly enhancing the firm’s push to build out their London practice. Kirkland & Ellis and Skadden – stalwarts of the London Legal market, also enjoyed growth and increased profile in the City.
Compensation and Strategy
US firms continued to set the pace for compensation packages, both in terms of salaries and bonus structures, once again raising the overall cost of legal services. This created a ripple effect that forced UK firms to reassess their strategies to attract and retain talent while also balancing the direct correlation between rising salaries and the expectation around increases to chargeable hours. Striking a balance between offering competitive salaries and maintaining a culture that prevents burnout remains a significant challenge within the sector.
Strategic Growth and Innovation
As the year progressed, it became apparent that strategic growth and innovation were key to a firm’s success, and ensuring that firms were well placed to deal with changes to the legal landscape. Notable success came from those mid-market firms that had a clear strategy to take advantage of the gaps made by larger, and perhaps more international, firms’ desires to compete with US firms for premium work. Further growth is anticipated from those mid-market firms with a clear strategy and good leadership, who are truly able to deliver a diverse, collaborative and more rounded culture, where individuals feel they can contribute and flourish.
Some firms found themselves grappling with an identity crisis, positioned ambiguously between the status of a premium firm and a mid-market operator. This lack of clear positioning and strategy resulted in challenges with attracting and retaining both clients and talent. The pressures of competing with top-tier firms while simultaneously addressing mid-market demands created a complex and often turbulent landscape for these firms.
Hybrid Working Arrangements
Hybrid working patterns have become the norm for most firms, with employees generally expected to attend the office either, 50% of the time over a two-week period, or three days each week. Throughout 2024, firms became less inclined to offer reduced office attendance as part of negotiation strategies. Instead, firms are now more likely to set clear expectations regarding hybrid working during the recruitment process, often indicating a preference for more frequent office attendance.
There is a growing trend of firms encouraging their workforce to be present in the office as much as possible. However, they remain mindful that each practice area has its own nuances concerning candidate availability in the market. In areas that struggle to recruit, firms will still occasionally use bespoke hybrid working patterns as a recruitment tool to attract new talent and a small number will offer fully remote options where business needs allow.
Advancements in Artificial Intelligence
Artificial intelligence remained high on the agenda for private practice firms. 2024 saw huge advancements in the legal sector with firms investing significantly in the development of AI to drive efficiency and innovation.
Despite innovations in AI a recent article by the BBC looking at a report on the testing of a series of AI models, run by Linklaters – a firm leading the charge on the use of AI within law, showed AI tools are now significantly better at answering legal questions, but are still performing below the level of a qualified lawyer. However, Linklaters report concluded “the fine tuning of this technology is likely to deliver performance improvements for years to come.” https://www.bbc.co.uk/news/articles/c743j83d8kzo
CityAM reported recently on the likely effect of AI on the way in which law firms price their work and the push from clients for a more predictable, flat-fee billing system. The article summarised research by legal software company Clio, which found 54% of UK law firms expect fixed-fee billing to increase over the next 12 months and that 81% of administrative billable hours could potentially be automated. As firms embed more AI into their work, speeding up previously time-intensive tasks, the billable hour system may cause problems when trying to justify their bills to clients. Commenting on the Clio findings, Sarah Murphy, General Manager at Clio noted “Law firms that adapt their billing models to meet client expectations will be in the strongest position to maintain long-term relationships and secure future business.” https://www.cityam.com/the-slow-death-of-billable-hours-at-law-firms/
Looking Ahead
We anticipate that the legal market will remain steady over the next 12 months, in the context of broader economic conditions and expect growth from firms that have adapted to change, listened to their employees, and led in innovation and technological advances. It will be interesting to see which firms possess the strategies and innovation needed to adapt to an ever-changing and increasingly complex legal market in the UK.
We also expect that recruitment, at both the partner and associate levels, will remain steady across the market. Notably, partners with a quantifiable following will have access to a wide range of opportunities, where alignment with their practice and clients exists. Given the ongoing changes within the private practice market, we anticipate that a greater number of partners will consider their options, seeking out firms that have demonstrated agility and strong prospects for growth.
At the associate level, we expect to see a range of opportunities, particularly for 3 PQE+ associates, to support growth-oriented teams through the addition of experienced hires. However, these hires will likely be subject to careful and considered sign-on processes in light of the prevailing economic conditions.
