Target Potential to Improve Profits - NatWest's new 2025 Report

NatWest Legal Report 2025 cover with colleagues in a meeting

The 11th Annual NatWest Legal Report is out - packed with insights that law firm management can use to benchmark performance, identify growth opportunities, and future-proof your practice.

Drawing on data from 110 UK law firms, the report goes beyond surface-level metrics. It offers a strategic framework for improving profitability, productivity, and resilience in a fast-evolving legal market. We see that effective adoption of technology will continue to grow as an increasingly significant factor in maintaining and improving performance.

📈 Profitability & Fee Income Growth

Median fee income growth hit 12% in 2025, up from 10% in 2024 - Section 3.1 (page 16).

Fees per fee earner rose to a median of £158,000, up from £144,000.

Profits per equity partner (PEP) surged by 23%, with larger firms seeing a 31% increase - Section 1.4(c) (page 9).

These gains stem from reducing lockup, sharper time capture, matter scoping, and fee earner productivity, not just market conditions - Section 1.4(b) and Section 3.2 (pages 8 and 16).

Takeaway: Firms that focus on productivity - especially time capture (where there are some new, powerful and affordable AI enabled tools available now) and matter scoping (again, where new tools are becoming available to support better pricing) - are outperforming peers and driving sustainable growth.

🤖 Technology & AI Adoption

Technology is reshaping how law firms operate, with AI adoption accelerating across the sector. We believe lawyers are being held back because there is still a lack of knowledge about how to ensure safe, secure adoption, which requires clearly defined and communicated internal policies and practices.

50% of firms are actively using AI, mainly for admin and matter management - Section 1.4(g) under “Other topical issues” (page 11).

In 2023, only 2% of firms reported using AI, confirming the recent rapid uptake but with half of respondents not yet engaged on this.

The strongest performers are those integrating technology with a clear long-term vision.

Takeaway: AI is no longer optional. Firms not yet exploring its use risk falling behind.

💼 People Costs

Employee costs as a percentage of fees dropped slightly

Total people costs came in at a median of 64% of fees - down from 65% last year.

Productivity gains are driving margin recovery, with firms investing in time capture, scoping, and matter management to boost chargeable hours and recovered time.

Headcount planning shows cautious optimism: 49% expect modest growth (up to 5%), 21% expect no change.

Takeaway: After years of margin pressure, 2025 marks a turning point. Firms that actively manage people costs and invest in productivity tools are seeing real improvements in profitability.

👥 Talent, Diversity & Inclusion

Law firms are making progress on diversity and talent development, which is increasingly linked to profitability.

Top-performing firms prioritise talent development and productivity.

66% of firms report that over 60% of fee earners are female, showing progress - Section 1.4(g) (page 11).

But only 21% of firms report over 60% of equity owners are female, so there is more work to be done here.

Takeaway: Investing in people is a key driver of profitability and long-term success. The influence of women is growing, but there should still be more female equity owners.

🌱 Sustainability & ESG

66% of firms have or are considering green energy investment – see Section 1.4(g) (page 11).

ESG is mentioned as a growing priority, though only 6% place it as a high priority.

Takeaway: ESG initiatives are increasingly linked to brand value and client expectations.

💡 Why This Matters - with much more here to digest!

As David Weaver, Head of Professional and Business Services at NatWest, puts it: “This report is far more than a collection of data. It offers a strategic framework to help firms identify where they excel and where there are opportunities for improvement.”

For law firm management, this creates a good opportunity to: