Interest income is driving hefty increases in profits per equity partner, a bellwether survey has revealed as the government ponders tapping into this lucrative revenue stream. NatWest’s Legal Report 2025 shows PEP grew by an average of 23% to a median £340,000 in 2025. Median fee growth was 12%, up from 10% the previous year. 

The survey, the 11th carried out by the bank, covers 110 commercial and mid-market firms with a median turnover of £17m. 

Respondents reported that interest profits represented a median 5.6% of their earned income, though in the largest firms the percentage rose to 9.5%. Extrapolating the figure to PEP showed that a median 21% of PEP arose from interest, the report states. Half of the firms reported that between 9% and 35% of their PEP arose from interest profits. Before 2022 this result would have been closer to 1% for most firms, it notes. 

The figure is likely to be noted by the government, which has mooted with firms and the Solicitors Regulation Authority the possibility of ‘an interest on lawyers’ client account’ scheme to support legal aid. 

Natwest report

The survey covers 110 commercial and mid-market firms with a median turnover of £17m

In other findings, the NatWest survey reveals that 29% of firms expect this year’s rise in national insurance contributions to hit profit margins, while 57% expect to cover the increase through higher fees. 

During 2025 firms said they continued to struggle to sustain margins following significant pay rises in 2023. 

Half of the respondents said they were using AI in their business. 

Private client and residential conveyancing were the most buoyant teams in summer 2025, with family law the worst performer. The South-West and Wales region was the most profitable, with a median PEP of £407,000. 

Overall, the report concludes that ‘an impressive 84% of law firms remain optimistic about their financial performance in the coming year. This resilience is a testament to the sector’s adaptability and strength’.

David Weaver, NatWest’s head of professional and business services, said: ‘Many of the firms we surveyed demonstrated strong growth in both fee income and profitability despite recent challenges, most notably margin pressures.’