Buy, sell, hold...

In terms of trends in the market, Liberum’s analysts highlight that the number of legal companies in the UK fell for the first time in 2020, and the Top 100, which has 72% of market share based on revenue, continues to expand its market share at the expense of smaller firms. Firms with five to 99 employees were ‘reducing in number over time’ while those with 100 or more have been expanding. It points out that the UK legal market is the second largest in the world, after the US, and has grown faster than GDP in the past 20 years.

The reasons for market consolidation include fee pressure due to commoditisation of services and greater requests for fee transparency, and cost pressures due to rising professional indemnity insurance premiums, salary competition from US law firms and an increasing number of qualified lawyers choosing to move in-house.

The sector note also addresses Brexit, concluding it ‘remains a threat, but we believe it could be positive for the mid-market firms under our coverage with a UK only focus.

‘While Brexit is likely to lead to a reduction in red tape, it will likely also reduce cross border trading, but the transition to a new way of operating is initially expected to increase work for lawyers.’