The Strategic Landscape for Mid-Sized Law Firms in 2025: Growth Ambitions Amid Talent Challenges

Source: The Law Society

A new report from the Law Society and MHA reveals that mid-sized law firms have identified growth as their primary strategic objective for 2025, with the majority pursuing organic expansion strategies while facing significant talent retention challenges.

Growth Remains the Ultimate Objective

According to the “Strategic Sector Insights for the Legal Profession 2025: Mid-sized Firms” report, growth emerged as the dominant theme among survey respondents. Approximately 49.3% of firms identified increasing market share as their biggest opportunity, with many focusing on both organic growth and expansion through mergers and acquisitions.

The survey, which gathered responses from 64 mid-sized firms with 8-50 partners across England and Wales, found that 17.2% of firms are planning to pursue a merger or acquisition in the next 12 months. However, the report notes that the majority of firms prefer organic growth strategies, including opening new offices, expanding current locations, or diversifying into new practice areas.

Talent Retention: The Critical Challenge

Despite growth ambitions, 41.3% of respondents identified recruitment and staff development as their greatest challenge. The report highlights several key factors driving talent concerns:

Better pay elsewhere (34.9%) was the primary reason for staff departures
Relocating (15.5%) and lack of progression (13.2%) were other significant factors
A concerning trend of reduced interest in partnership roles was noted

The report suggests these challenges may stem from changes in attitudes toward work-life balance and career progression post-pandemic, with many professionals preferring to focus solely on practicing law rather than taking on business management responsibilities.

Hybrid Working: The New Normal

The survey revealed that 71.9% of firms have adopted a three to four-day office attendance policy, with a notable correlation between firm size and office attendance expectations. Smaller firms (under £5 million revenue) were more likely to require office attendance, with 77.2% expecting four or five days in office, compared to just 29.4% of firms with revenue exceeding £10 million.

Most firms (83.8%) reported increased or comparable productivity levels under hybrid working arrangements. However, 30.9% noted that office culture had deteriorated, outweighing the 29.4% who saw improvement.

Technology and AI: Cautious Adoption

While technology presents significant opportunities for efficiency gains, only 50% of firms reported planning significant IT upgrades in the next 12 months. Even more telling, just 25% of surveyed firms are currently using AI within their business, with a third of non-adopters having no intentions to explore AI implementation in the coming year.

The report identifies several potential applications for AI, including co-pilot functions, marketing assistance, and administrative task automation. However, most firms are approaching AI with caution, preferring to wait for more evidence before investing in these systems.

ESG Considerations Gaining Momentum

Environmental, Social, and Governance (ESG) considerations have become increasingly important for mid-sized firms. The report notes high levels of awareness regarding Equality, Diversity, and Inclusion (EDI) initiatives, with many firms implementing formal policies and training programs.

A surprising number of smaller firms (below £10 million revenue) reported having well-defined ESG plans in place, suggesting these considerations are becoming essential competitive factors rather than merely aspirational goals.

Financial Outlook

The financial picture for mid-sized firms appears positive, with 69.2% reporting increased turnover compared to the previous year. Among those experiencing growth, 42.2% saw revenue increases exceeding 10%. This growth may be attributable to higher pricing strategies, focus on niche markets, and improved operational efficiency.

However, rising costs present significant challenges, with 22.7% of firms identifying this as a major threat. Key expense increases include Professional Indemnity Insurance premiums, higher interest rates, increased staff costs, and the recently announced employer National Insurance rate hike from 13.8% to 15%.

Looking Ahead

As mid-sized law firms navigate 2025, the report suggests that success will depend on balancing growth ambitions with effective talent management strategies. Firms that can adapt to changing work patterns, embrace appropriate technology, and address rising costs while maintaining strong cash flow management will be best positioned to achieve their strategic objectives.

The report concludes that while external factors like economic and political volatility create uncertainty, law firms now have greater control over their strategic direction compared to the reactive positioning required during the pandemic, potentially making their objectives more achievable than before.