Value of legal services market “to hit £50bn” this year

IRN Legal has indicated that family, employment, and private client lawyers are poised to lead advancements in consumer law, while residential conveyancing is expected to rebound after a challenging 2023. Meanwhile, the personal injury sector is anticipated to remain the least robust performer.

In terms of market growth, researchers observed an 8.3% increase in the UK legal services market last year, with the total reaching £47.5bn at current prices. Expectations for market turnover suggest a rise to £50.3bn this year, albeit at a rate slightly below last year's, with projections reaching £53.5bn in 2025, £57.5bn the following year, and £61bn in 2027.

The largest market segment was legal advice for business and commercial matters, including commercial property, which accounted for nearly half of the total market at £23.4bn. The core consumer law market was valued at over £18bn in 2023, with personal injury, accident, and medical negligence work constituting the largest segment at over £4bn. This was followed by family law and employment law. Other legal services, including immigration and intellectual property, accounted for the remaining £5.9bn.

IRN anticipates that merger and acquisition activity within the consumer law market will continue at the pace set in 2023. Private equity investors are expected to maintain their interest in the sector. The report forecasts ongoing consolidation across virtually all consumer law sectors, with volume players likely to increase their market shares. There is also an expected surge in interest in employee ownership trusts as a model for legal businesses and an enthusiasm for obtaining B Corp certification among firms.

Moreover, merger and acquisition activity, more broadly, is expected to witness a resurgence in 2024 globally. Improved economic and financial conditions later in the year are likely to enhance corporate investment, contributing to growth in corporate law. This includes a demand for corporate restructuring advice, insolvency law due to the high level of business closures, and an increased need for advice on the application of artificial intelligence.

The annual UK Legal Services Market Report by IRN predicts steady growth in the family law market, driven by demand in areas such as financial remedies after divorce, domestic abuse, and Children Act matters. Despite a slowdown in the rush to file for no-fault divorce, there remains a backlog of cases that will delay legal fee payments for advisers.

The core will-writing market is expected to see limited growth, but the private client sector is likely to benefit from complex wills and estates, advice on lasting powers of attorney, and services related to funeral and care plans. There is also anticipated growth in contentious wills and probate advice.

The employment law sector, considered highly competitive, is expected to perform well this year, with growing demand driven by new employment legislation. Restructuring efforts and attempts to change terms and conditions are likely to lead to more disputes.

Conveyancers, after facing nearly two years of downturn, are hopeful for improved prospects in 2024 and beyond. However, the outlook in the short term remains cautious due to relatively high-interest rates, although rates are expected to start falling later in 2024.

In the personal injury market, some providers are contemplating exiting or reducing their presence in certain segments, such as low-value claims. While some large players have completely left the small claims market, others are acquiring small claims books to increase their market presence. Motor claims are on the decline, and most other market segments are facing competitive pressures due to a smaller market size.

Researchers conclude that negligible market growth is expected to continue into 2024 and 2025. However, some providers are reporting positive results and have expansion strategies planned for the next three to five years.