1. Stress-test growth as momentum slows
Median fee income growth was 7% in 2026, compared with 12% in the 2025 NatWest survey. Smaller firms recorded a median of 5%, while larger firms recorded 8%.
This matters because slower top-line growth leaves less room to absorb higher employment, technology and regulatory costs. SME firms should test growth plans against more conservative assumptions and separate genuine volume growth from rate increases.
Management action: Review revenue by team, matter type and client. Identify which work is growing profitably, not simply generating more fees.
NatWest support: Our professional services team can discuss your growth plans, forecasts and funding considerations.
2. Protect margin as people costs rise
Median employee costs rose to 48% of fees from 46%, while total people costs reached 64% from 63%. The report indicates that higher employer National Insurance costs added around one to two percentage points to people costs for a typical firm.
Median profit per equity partner growth was only 2%, compared with 23% in the previous survey. The evidence suggests that firms cannot rely on revenue growth alone to protect returns.
Management action: Track gross margin by work type and team, then focus partner attention on scoping, delegation, write-offs and recovery.
3. Turn productivity data into action
Median fees per fee earner were broadly unchanged at £166,000. Nearly half of firms reported that average chargeable hours were static or declining, and 28% recorded fewer than four chargeable hours a day on average.
Time recording is not only a billing tool. It provides the cost information firms need to price work, understand capacity and test whether fixed-fee or value-based services are commercially sustainable.
Management action: Introduce a weekly exception report covering missing time, unbilled work, write-offs and matters moving outside scope.
4. Shorten the journey from work to cash
Median lock-up increased from 128 to 136 days. WIP days remained comparatively stable, suggesting that billing and collection discipline may be a more immediate issue for some firms than work production.
For an SME law firm, a profitable matter can still create pressure if it is scoped poorly, billed late or collected slowly.
Management action: Set clear billing milestones at matter opening, give every overdue balance an owner and review aged debt and WIP at least monthly.
NatWest support: If longer lock-up is affecting cashflow, we can discuss your working-capital needs and possible funding options.
5. Make AI investment prove its value
Only 5% of firms said they were not using AI, compared with 50% in the previous survey. However, 64% reported taking no action to recover AI investment costs, while 43% said the clearest benefit so far was streamlined administration.
Adoption is no longer the main question. Firms now need to determine where AI saves time, how released capacity will be used and whether pricing or service design should change.
Management action: Select two or three use cases, record the baseline cost and time, measure the benefit and decide in advance how value will be captured.
NatWest support: Planning technology investment? We can discuss whether professional practice finance or asset finance may be suitable.
*Products are subject to eligibility, status and terms and conditions. Finance is for business purposes only; security and fees may apply. Asset finance is provided by Lombard.
Six actions to take over the next 90 days
- Revenue and talent: Compare fee growth, matter volumes and rates by team; link recruitment to realistic demand.
- Margin and pricing: Review people costs, write-offs and recovery; re-scope consistently under-recovered work.
- Productivity: Use weekly exception reporting to monitor missing time and unbilled work.
- Cash: Assign matter-level responsibility for WIP, billing and overdue debt.
- AI: Measure cost, time saved, risk controls and capacity released for each use case.
- Resilience: Model slower growth and rising costs, then review operational performance monthly.
Turn the benchmarks into better decisions
The findings draw on 112 UK law firms with combined revenue above £2.4bn. Benchmarks are a starting point: practice mix, geography, ownership and pricing all affect performance. Firms should focus on whether their own trend is improving and whether leaders can explain it.
A concise monthly dashboard covering pipeline, margin, productivity, lock-up, recovery and technology benefits can support decisions on pricing, recruitment, investment and funding.
Make financial discipline the priority
The operating environment is becoming more demanding, but the response need not be complex.
Clearer information can help firms identify opportunities to release cash or protect margin, while defined ownership and measurable outcomes can strengthen investment decisions.
*Products are subject to eligibility, status and terms and conditions. Finance is for business purposes only; security and fees may apply. Asset finance is provided by Lombard.
Join our webinar
We’re hosting a webinar on 1 October to discuss the report’s findings and what they mean for legal firms.
Hear from PKF Francis Clark's partner, Andrew Allen, and our Head of Professional and Business Services, David Weaver, by registering for our virtual event today
