UK firms are still lagging some US competitors, who pay their new lawyers £180,000 a year on average.
However, PwC found that law firms are concerned that they will be unable to recover higher costs by increasing hourly fees as clients seek to cut their own spending on law firm advice.
It warned that law firms still face “significant wage inflation”, even as UK inflation has eased and returned to the Bank of England’s 2pc target rate. It fell to 1.7pc in September, the lowest level in more than three years.
Kate Wolstenholme, the leader of PwC’s law firm advisory group, said: “As it becomes harder for firms to sustain the rate increases that have helped them absorb rising costs in recent years, fundamental productivity and growth challenges must be addressed.”
It expects that law firms will be forced to save costs through boosting productivity among workers, especially targeting fee earners not meeting billable hour targets.
Although staff turnover has subsided this year compared to 2023 levels, the report expects greater movement in future years as firms rethink the “size and shape” of their workforces in response to the rollout of artificial intelligence (AI)-powered tools.
It also predicted that some law firms will transform their business operating models – which could see staff roles and routine tasks outsourced overseas to cut costs.
While larger UK law firms remain positive about the productivity gains from AI, PwC found that some mid-market rivals are extremely concerned that the tech will harm their business.
These firms shared concerns about the upfront costs of investing in AI and that clients will expect the same legal services to be delivered for cheaper prices.