The UK legal sector’s turnover rose by 11.5% in 2021 to a new record of £41.6bn, according to data released today by the Office for National Statistics (ONS).

And the sector demonstrated its strength by brushing aside fears over the emergence of the Omicron variant last November, recording a 7.2% month-on-month increase in December, compared to a 1.3% contraction across the services sector as a whole, according to analysis by the law firm Kingsley Napley.

The growth in 2021 is all the more impressive given a strong bounce back in the latter half of 2020, which helped the legal sector record marginal positive growth in the first year of the pandemic, when it edged up to a then record of £36.8bn. ONS data shows that legal services revenue fell in Q1 and Q2 of 2020, but started growing again in Q3.

Tony Williams,  principal of Jomanti Consultants, described the latest data as “astounding”. “The worst impacts of the pandemic happened at the very beginning, so that counted in the previous financial year," he said. "When you look at 2020 and 2021, it only got better as the year went on. The transaction markets took off around the world and UK law firms performed excellently, something that was mirrored by US firms as well.” 

He added: “There have been warning signs for 2023, but this has been a remarkable period in any event. In a time when other industries were holding on for dear life, the legal sector has been immune and has perhaps emerged even stronger.” 

Julie Norris, regulatory partner in legal services at Kinglsey Napley, said: “These results no doubt chime with firm leaders' on the ground experience that workflow was buoyant even during a time of increased restrictions due to Covid-19 and the Omicron variant. However, firm leaders should not let these strong numbers distract them from the importance of supporting staff, attracting talent and continued regulatory oversight during the months ahead.” 

Norris said firm leaders should not turn a blind eye to the needs of their lawyers and staff amid surging profits and client demand, an issue that has been brought into sharp relief during the pandemic, particularly concerning more junior lawyers. 

“Employers must ensure they have the right systems and processes in place to ensure compliance and as part of that risk profile, look carefully at how they create and promote a positive culture,” she said. 

Norris also highlighted the new guidance published by the Solicitors Regulation Authority this week concerning the improvement of workplace cultures for law firms in the UK. The regulator’s guidance was based on the views of some 200 solicitors and additional feedback form industry stakeholders and found that while the majority of respondents felt positively about their work environments, there was still progress to be made with regards to issues like systematic bullying, discrimination and mental health.

Writing in Global Legal Post today, Dentons chairman Joe Andrew warns that as associate turnover reaches critical levels law firms must ‘focus on culture as well as compensation’ in order to hold on to their talent.