Law firms are slowly weaning themselves off treating interest on client money as a business-critical income stream, amid a buoyant market for their services.

That is one conclusion to be drawn from this year’s Law Society Financial Benchmarking Survey, one of the sector’s most respected annual bellwethers.

In 2025 firms experienced their highest growth in over 15 years. Median fee income climbed 11.2%, almost double the 6.1% recorded in 2024.

Of the 121 firms surveyed, 85% reported year-on-year growth and over half posted a double-digit percentage rise. Increases were recorded across all regions and work types. Conveyancing income rose by a median 27% as the residential property market rebounded.

Higher chargeable hours, lower overheads and reduced lock-up all contributed to stronger bottom-line performance. Median profit per equity partner rose 13% to £290,000. That is below last year’s 21% rise, but still the second-largest increase since 2014 excluding the Covid outlier of 2021 (+39%).

Client interest receipts rose 11%, compared with 150% in last year’s survey. More significantly, median PEP rose 10.5% excluding interest receipts, up from 1.2%.

Last month the government closed its consultation on proposals to raise funds through an Interest on Lawyers’ Client Accounts Scheme. No decision is expected before the May local and Senedd elections. 

There are other encouraging signs that firms are getting better at financial hygiene. Median lockup fell from 146 days last year to 134, a notable reduction following years of stasis. Chargeable hours per fee-earner climbed from 752 to 807. Non‑salary overheads fell as a share of income to 28.4% from 31%, with median overhead costs per fee-earner broadly stable.

Mark Evans, president of the Law Society, commented: ‘Despite ongoing external uncertainty and an increased need to invest in new technology, law firms are seeing strong growth. The legal sector remains healthy and resilient. Solicitors continue to support clients, businesses and communities while heavily contributing to the UK’s economy. With the right support and investment, England and Wales can continue to lead the world as a renowned legal centre.’

Firms surveyed named cybersecurity as the biggest immediate challenge to their practices. The perceived competitive threat of consolidator firms has significantly diminished. 

A total of 121 firms with an average turnover of £9.9m participated in the 2026 survey. Now in its 25th year, the survey is conducted by accountancy firm Hazlewoods for the Law Society Leadership and Management Section, and sponsored by Lloyds Bank Commercial Banking.