Financial Benchmarking Survey 2025: What Law Firms Need to Know

The latest Financial Benchmarking Survey, produced by Hazlewoods LLP in partnership with Lloyds Bank, provides an in-depth look at the financial health and performance of law firms across England and Wales. With data collected from 145 firms, representing a combined fee income of over £1.1 billion, this is one of the most comprehensive surveys of its kind. The average fee income per practice stood at £7.8 million.

The research offers timely insight for law firm leaders, partners, and practice managers navigating a complex and increasingly cost-sensitive environment.

Key Findings at a Glance

• 71% of firms reported year-on-year fee growth in 2024, with one-third seeing growth over 10%.
• Median fee income increased by 6.1%, slightly down from 6.8% in 2023—indicating a continued deceleration since 2022.
• The cost of a fee earner rose by 6.1%, with total salary costs now accounting for 63.5% of fee income.
• Chargeable hours per fee earner increased marginally from 765 to 773, still well below the target of 1,100 hours.
• Total lock-up days (work in progress and debtors combined) rose slightly, from 143 to 146 days.
• Profit per equity partner increased, largely driven by exceptionally high interest income—a trend unlikely to continue.
• The Solicitors Regulation Authority’s (SRA) consultation on client money may have far-reaching implicationsfor firm finances and business models.

Interpreting the Data: What It Means for Your Firm

Slowing Growth, Rising Cost

While the majority of firms saw fee growth, the pace is slowing. Simultaneously, the cost of delivering legal services continues to rise. The average cost per fee earner increased to £67,476, and nearly 93% of fees earned are used to cover these costs.

Firms must look critically at pricing strategies, cost controls, and operational efficiency. In an environment where margins are tight, sustainable growth will depend on smarter resource allocation and improved productivity.

Chargeable Hours Lag Behind Targets

Although chargeable hours have inched upward, they remain far below expectations. This persistent gap impacts profitability and may point to deeper issues in time recording practices, workload balance, or team structure.

A renewed focus on time management, billing discipline, and performance tracking is essential. Training, culture shifts, or the adoption of time-recording technology may offer tangible benefits.

Lock-Up Days Highlight Cash Flow Risks

The slight increase in lock-up days reinforces a long-standing concern: slow conversion of work into cash. With financial pressures mounting, strong cash flow management is critical.

Proactive debtor management, streamlined billing processes, and better control of work-in-progress can help free up working capital and reduce financial stress.

Interest Income Masking Deeper Profit Concerns

This year’s rise in profit per equity partner is heavily linked to elevated interest income. However, this boost is unlikely to be sustainable, particularly in light of looming regulatory changes. Firms must build resilience into their financial models, ensuring that core operations not external factors are driving profitability.

Regulatory Change on the Horizon

The SRA’s ongoing consultation on client money has the potential to significantly alter how law firms operate. A reduction or elimination of interest income on client funds could create cash flow challenges and shake financial stability for many practices.

Now is the time to model different financial scenarios and prepare for change. Engagement with the consultation process and a proactive approach to risk management will be key.

Conclusion: Strategic Focus for 2025 and Beyond

This year’s survey paints a picture of cautious optimism tempered by real and growing financial pressures. Fee income is still rising, but so are costs. Productivity gains remain elusive, and upcoming regulatory changes may add further strain.

For law firm leaders, the path forward involves more than just reacting to financial trends – it means anticipating them, challenging assumptions, and taking deliberate steps to ensure long-term sustainability. Whether through technology adoption, smarter staffing, tighter financial controls, or strategic planning, the firms that act now will be better placed to weather whatever lies ahead.

If you would like to discuss any of the themes contained in this blog please contact us.