The Legal Services sector’s index score rose from 110 to 118 this year (normalised to the base year of FY19 = 100), driven primarily by strong growth in revenue and profits. In contrast, profitability and cash flows scores remained flat year over year, reflecting ongoing structural challenges.
Sector performance
Legal Services sector performance, by dimension, is as follows:
- Growth: Firms saw rising demand across practice areas, which, combined with increased billing rates, resulted in robust revenue growth. As demand strengthened, leading firms began expanding their global footprint to better serve clients across geographies.
- Profitability: Margins held steady compared to the previous year, as higher billing rates helped offset rising employee compensation costs. To further enhance profitability, firms are tightening cost controls, with larger players leveraging global delivery centres to optimise operational expenses.
- Productivity: Despite a modest increase in headcounts, firms were able to achieve strong revenue growth, demonstrating efficient use of existing talent. Broader adoption of digital tools, such as knowledge management systems, also contributed to productivity gains. However, GenAI adoption remains in its early stages.
- Cash flow: Improved collections and solid earnings helped maintain last year’s liquidity ratios. Working capital optimisation remains a priority, with many firms focusing on enhancing receivables management through initiatives such as electronic invoicing.
Priorities for success
Rising service costs, driven by inflationary pressures and potential demand volatility, remain a concern for firms in the Legal Services sector. In addition, law firms must contend with rapid technological change, particularly the emergence of AI. To stay competitive and meet evolving client priorities, leading firms are reconfiguring operations to leverage global delivery capabilities. Some are also expanding into new geographies to tap into emerging demand centres and investing in technology to enhance efficiency and agility.
How do you compare?
Use the simple interactive comparison tool below to map your company’s key metrics against sector peers. The tool offers a sliding scale to provide approximations for two of the four dimensions (i.e. growth and profitability) used in the creation of the annual GBSI.
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About the author
Global Business Services Index 2025
An annual outside-in view of the Business Services Industry and its performance across 8 key sectors
