Top law firms widen lead as profit gap across legal sector expands, PwC survey finds

·       Performance increasingly polarised: top ten firms achieved average global net profit growth of 13%, compared with 3.2% among top 11–25 firms

·       The UK’s ten largest law firms now account for more than half (51%) of all total top 100 fee income, up from 45% two years ago

·       UK net profit margins rose to 41.3% among top ten firms but fell to 24.0% among top 26–50 firms, with firms in the 51-100 bracket now more profitable with margins rising to 25.4%.

·       AI adoption has moved beyond experimentation: 66% of the top 100 have implemented AI, up from 43% last year, but less than 10% report monetised benefits

PwC UK’s 35th Law Firm Survey finds a legal sector that remains resilient, with 95% of the UK top 100 achieving fee income growth. However, the survey also reveals an increasingly polarised ability to convert revenue and rates into profit, widening the performance gap and placing more pressure on the mid-market. 

Mid-tier firms, comprising firms ranked 26-50, are aiming to replicate the scale, international footprint and investment of the largest firms but have been unable to achieve those ambitions to date. This group’s fee income into profit figures contracted by 3.2 percentage points, a trend continuing over four consecutive years. This resulted in a fall in net profit margin for top 26-50 firms to 24.0%.

The findings indicate that the largest firms are benefiting from scale, international reach and operating leverage, with the top 10’s share of total top 100 fee income increasing from 45% to 51% over the past two years. The top 11–25 and Top 26–50 firms have seen a contraction from 26% to 23% and 17% to 16% respectively. Top 51–100 firms increased their share by one percentage point to 12%. Smaller firms are investing in sector or practice specialisms to build expertise and competitive advantage without the geographic investment required by larger firms. 

AI adoption is accelerating, but commercial returns remain limited  

Top 100 firms have moved on from a period of experimentation, with 66% now implementing AI, up from 43% last year. However, only 8% report monetised benefits, suggesting that the challenge is shifting from adoption to transforming how legal services are delivered, staffed, priced and rewarded. 

UK financial performance

The UK market continues to demonstrate resilience, with every top 100 band reporting average UK fee income growth of between 5.7% and 9.4%. Firms’ ability to translate growth into profit varied across the bands. Profit growth outpaced fee income growth by 5.6 percentage points among top ten firms and 3.1 points among Top 51–100 firms but lagged by 0.3 and 3.2 points respectively among top 11–25 and top 26–50 firms.

Average fees per chargeable hour rose across every segment, by between 2.6% and 6.6%. Top 11–25 and top 26–50 firms recorded strong rate increases, at 5.5% and 6.6%, but these did not translate into equivalent profit growth, suggesting that operational efficiency, utilisation and cost discipline are decisive levers of profitability.

Global financial performance varies across regions  

Global fee income remained strong, with top 10 firms seeing an increase of 6%, consistent with the previous year. In comparison, growth among top 11–25 firms slowed from 7% to 4%.

Top 10 firms reported average global net profit growth of 13%, more than twice the rate of fee growth, compared with 3.2% among top 11–25 firms. The average global net profit margin among top 10 firms rose from 34.9% to 37.4%, while the top 11–25 margin remained at 25.1%.

The survey reveals considerable variation in regional performance. Top 10 firms grew fee income by 10.3% in Western Europe, 12.0% in China including Hong Kong, and 13.3% across the rest of Asia. Top 11–25 firms achieved 6.5% growth in Western Europe but saw declines of 1% in China and 8.3% across the rest of Asia. Despite political instability, both groups grew in the United States, and the Middle East.

The analysis suggests that the value of international scale increasingly depends on the quality of a firm’s geographic portfolio, client relationships and ability to generate profitable cross-border work, rather than geographic breadth alone.

Although firms remain optimistic about their performance, several groups continued to miss their growth targets. Top 10, 11-25 and 26-50 firms struggled to meet fee growth targets of 10.0%, 8.3% and 9.9% respectively, achieving actual growth of 5.8%, 5.8% and 8.7%. Top 51-100 firms fared better, achieving fee growth of 9.5%, ahead of their 8.3% expectation. Looking forward, top ten, 11-25 and 26-50 firms are expecting fee growth of 8%-9% in FY27, with top 51-100 firms expressing more optimism at 11.2%. This means all firms expect to improve on FY26 performance. 

Concern about pace of technological change and UK government policy rising  

Concern about the pace of technological change increased across the top 100, from 73% to 84%. Concern about clients automating work and reducing their reliance on external counsel increased from 53% to 68%, while concern about pressure on rates rose from 66% to 73%. 

Cyber risk also remains high on the agenda, with 85% somewhat or extremely concerned about cyber threats affecting their ability to meet their ambition, a notable decline from 92% in 2025. At the same time, 83% express confidence in their ability to respond to and recover from a significant ransomware attack, possible explaining the aforementioned reduction. 

Concern about macroeconomic volatility has eased this year, however concern around UK government policy notably increased by 29%.   

Mark Anderson, Global Professional & Business Services Sector Leader at PwC UK, said:

“The UK legal sector remains remarkably resilient, despite a challenging macroeconomic environment. Economic uncertainty, geopolitical volatility and rising costs present an ongoing challenge for firms. However, resilience is not being achieved evenly and the performance gap between winners and losers is stark.  

“The largest firms are pulling ahead - using their scale, operational discipline and targeted investment to convert growth into profit, while some smaller firms are succeeding through specialism and agility. That leaves the 'squeezed middle' finding it increasingly difficult to absorb cost pressures while achieving growth and ultimately placing them under pressure from both directions.”

AI central to the transformation of legal services  

Growth remains the leading strategic priority, with 67% of top 100 firms targeting specific sectors compared with 22% pursuing geographic expansion. However, more than half (52%) of firms plan to use AI to reshape service delivery or turn services into products, compared with 42% focused on efficiency. More than 75% of top 50 firms have invested in specialist legal AI assistants, while dedicated AI teams are now established across the market. 

Commercial returns remain limited, with just 8% having realised chargeable-hour savings greater than 10%. Firms nevertheless remain optimistic, estimating that around 18% of chargeable hours could ultimately be saved through AI, up from 16% last year. 

However, capability gaps may be constraining progress. While 70% of top 100 firms report well-established AI policies and controls, only 23% have well-established training. 

Lucy Robson, Tax Leader and Survey Lead, Law Firm Advisory Group at PwC UK, said:

 “AI adoption has accelerated significantly, but implementation is only the starting point. Firms are reporting improvements in productivity, quality and responsiveness, yet fewer than one in ten have translated those gains into monetised benefits.

“The firms that lead the next era will use technology to rethink how services are delivered, and, critically, priced, with a relentless focus on improving the quality of client outcomes. They will also need the commercial discipline to decide where to compete, what to stop doing and which capabilities warrant investment.

“The greatest risk isn’t disruption from outside the sector, but complacency within it. Strong performance today should not be confused with readiness for what comes next.”

Profit per full equity partner (PEP) improved across most of the sector  

Top ten firms recorded the strongest like-for-like increase, at 10.3% to £1.82m. PEP rose by approximately 3.0% among top 11–25 and 5.8% for top 26–50 firms, while top 51–100 firms held PEP broadly in line with 2025 as several firms further invested in the full equity partner grade. This reflects both underlying profit growth and active management of the equity partner population.