Marketplace Update: Q1 2026

The first quarter of 2026 opened against a backdrop of geopolitical instability, most notably ongoing tensions in the Middle East and persistent macroeconomic uncertainty closer to home. Historically, such conditions might have cooled lateral hiring and dampened partner movement. Instead, the UK legal market, and London in particular, has demonstrated notable resilience. From a Partner recruitment standpoint, activity levels have remained steady, with strategic hiring continuing across key practice areas and firms showing a willingness to invest where it matters.

The Middle East

London’s legal market has, in recent years, shown strong confidence in the Middle East, with many firms making significant investments to expand their presence and capture growing demand in the region. However, against the backdrop of the ongoing 2026 Iran war, the near-term outlook feels increasingly uncertain, with a return to working from home which will inevitably underline the feeling of regional instability. It will be telling to see whether firms take a more cautious approach and pull back on investment or continue to lean in as demand for legal services potentially rises amid volatility. For now, the direction of travel remains unclear and is one to watch closely over the short to medium term.

Sector Focus

Two sectors have stood out at Partner-level in Q1: energy and technology.

Energy transition continues to generate a steady pipeline of work, from infrastructure development to regulatory advisory, making energy-focused partners highly attractive. Simultaneously, the tech sector, spanning fintech, AI, and data infrastructure, remains a key growth engine for law firms. Practices that can combine corporate, regulatory, and sector-specific expertise are particularly well-positioned.

Corporate: Still in demand

Corporate remains the single most sought-after practice area at Partner level. Across the market, there is near-universal interest in corporate partners with credible books of business, particularly those with exposure to private equity, M&A, and high-value cross-border transactions.

The continued dominance of US firms in London underscores this trend. Firms such as Latham & Watkins have once again posted exceptional financial results, reportedly surpassing $1bn in London revenue alone. This level of performance is not just symbolic; US law firms are actively reshaping hiring strategies across the City. UK and international firms alike are under pressure to compete, both in terms of compensation and platform strength, particularly within corporate.

Investment into corporate teams is also driving parallel growth in supporting practices such as regulatory, tax, and employment, demonstrating deeper bench strength across the platform and strengthening the firm’s ability to attract and integrate high-quality corporate partner lateral hires.

The US Effect

There is little doubt that the London legal market is in a period of flux, driven largely by the continued expansion of US law firms in the City.

We are seeing increasing discussion around mergers and strategic alliances. Several firms have openly acknowledged the need to explore such options to remain competitive at the top end of the market. This trend is unlikely to slow, particularly as scale, profitability and international reach become more critical differentiators.

As a result, the legal market is becoming more polarised. On one side are firms pursuing global expansion through US mergers, aggressive lateral hiring, and alignment with US compensation models. On the other are firms doubling down on their core strengths, focusing on what they are good at, which generally means their sector specialism, or regional dominance.

Private Capital

Private Capital is also an element shaping the legal market in London. Whilst law firms may take different views on whether to engage with it, understanding private capital’s impact is becoming increasingly important for leadership teams thinking about long-term strategy and growth.

We recently sat down with David Morley, former Managing Partner and Executive Chairman of Allen & Overy and now co-founder of Dejonghe & Morley LLP, who has a unique perspective on how investor interest in law firms is evolving. You can watch the full conversation here: https://bit.ly/4te9OIg.

Partner Remuneration

Another defining feature of Q1 has been the continued adjustment to law firms’ Partner remuneration structures across the City.

Key trends include:

• Revisions or getting rid of entirely Swiss Verein structures to reflect law firms’ strategic priority of offering a coherent global strategy,fostering cross-border collaboration and increasing profitability, with DLA Piper being the latest firm to announce doing so, when it moves to one global structure in May;
• Increased de-equitisation and the expansion of Income Partner tiers across the market, with firms such as Freshfields introducing an income partner level to boost profitability, in particular in the US market;
• Greater influence of US compensation benchmarks continues to infiltrate the London market, with Firms like DLA Piper measuring Partner remuneration on similar metrics to American-style metrics and Addleshaw Goddard changing their compensation structure to allow for much greater payments to attract those partners who would otherwise be.

The net effect is a higher bar for equity partnership in many firms. Equity is becoming more selective, more performance-driven, and, in some cases, more unattainable.

Associate Market

The start of the year has proven to be a challenging period for the Associate legal market, with hiring activity noticeably subdued across the City. While demand has not disappeared entirely, the number of available roles remains limited, creating a more competitive environment for candidates. At the same time, firms are maintaining a particularly high hiring bar, focusing on top-tier talent with strong technical skills and relevant experience. This combination of fewer opportunities and heightened expectations has made it more difficult for Associates to secure new positions, contributing to an overall cautious and selective market.

Q2 Outlook

As we move into Q2, attention is turning to financial results as firms begin to publish their year-end numbers. These will provide a clearer picture on market direction but, in the meantime, there are several trends we expect to see:

• Further mergers are expected as US firms maintain their expansion into the UK market;
• More firms are likely to revisit their partner remuneration structures to ensure they remain profitable;
• Law firms are increasing their focus on the adoption of artificial intelligence, both as a client-facing offering and an internal efficiency driver, with growing implications for hiring.