Marketplace Update: Q4 2025

Financial results

The final quarter of 2025 is ending on a confident note for most of the major law firms. The legal market remains resilient, with overall activity steady across corporate, finance and disputes practices. While deal volumes have moderated slightly from mid-year highs, profitability across City firms is holding strong.

We are seeing steady revenue growth across the City’s leading firms despite an uncertain global backdrop. Profitability continues to trend upward, though many managing partners are quietly acknowledging that this has been achieved through careful cost management and reshaping of business services teams, rather than an explosion in new work.

Heading into Q4 2025, UK law firms are focusing on protecting profitability through tighter cost control, smarter use of technology, and more efficient operations. Many are experimenting with value-based pricing to meet client demands, while being increasingly selective about lateral Partner hires and equity promotions to safeguard margins.

Recruitment trends anticipated for Q4 – Associates and Partners

Associate-Level:

Associate movement remains steady but more selective. We are seeing a shortage of Associate-level candidates, which is keeping competition for talent high. Certain practice areas are thriving but struggling with limited Associate support, forcing clients to adjust and broaden their hiring criteria.

Partner-Level:

At partner level, the market is still lively with plenty of practice-building opportunities, platform strength and remuneration models continuing to drive movement.

Partner candidates are increasingly focused on gaining a clearer understanding of a firm’s partnership structure and long-term progression model before making a move. Many are seeking greater autonomy and a shift away from rigid or highly political environments. Additionally, as charge-out rates continue to rise across the market, Partners are prioritising platforms that offer flexibility. This is to both maintain competitive pricing and to ensure client satisfaction. This trend highlights a broader shift toward more agile, commercially minded firms that can balance profitability with client retention.

US Law Firms and a return to the City

US Firms continue to dominate the conversation in London, both in their hiring appetite and in the increasing pay gap between UK and US peers. Sidley, Proskauer and Quinn have all remained active in 2025, while several mid-tier US entrants have gained traction by hiring well-known laterals from the Magic and Silver Circle. That said, many UK firms have started to fight back and are doubling down on domestic dominance, regional growth, or international expansion to maintain momentum.

We’re increasingly seeing a more deliberate approach to hiring from US Law Firms, with greater emphasis placed on the strength of a partner’s book of business. There’s also a noticeable return to the City among partners who’ve found that the US platform (despite the hefty paychecks) haven’t lived up to expectations.

The Budget

Chancellor Rachel Reeves’ Budget next month will inevitably have an impact on Q4 . With potential tax changes on LLP profits now firmly on the agenda, it is yet to be seen how both Law Firms and partner candidates are reassessing the value of equity. If these proposals go ahead, some Partners could see effective tax rates climb above 50% which is a shift that may redefine how London law firms’ structure and reward their partnerships.

Its yet to be seen what the real impact on legal recruitment in London will be following the budget. Firms that anticipate and internalize these pressures early (for example by stress-testing their partnership models, embedding tax planning into recruitment, and developing hybrid models) will be better positioned.

Summary

The UK legal market is finishing 2025 in a position of quiet strength and heading into 2026 with sustained confidence. Law firms are performing well overall, with profitability holding up thanks to tighter cost control and smarter operational strategies rather than major growth in new business.

Associate recruitment remains challenging due to a limited talent pool, forcing law firms to broaden their hiring criteria. Partners are becoming more selective, prioritising firms that offer flexibility, autonomy, and transparent progression opportunities. US law firms still hold a dominant presence in London, but there’s also a noticeable shift as some partners return to the City seeking a more balanced platform and stable long-term prospects. Looking ahead, the upcoming Budget and possible tax changes to LLP profits could reshape partnership models, making early planning and adaptability key as firms prepare for 2026.