Since the start of 2025, our practice has seen a marked uptick in enquiries from law firms about restructuring, new authorisations, and alternative business models.  

The question we keep returning to is: what is driving this? Well, it’s likely a confluence of factors – some regulatory, some fiscal, and some commercial – converging at the same time. The latest SRA Authorisation Annual Report 2023/24, published in February 2026, provides important context and statistical grounding for the trends we are observing on the ground.

A significant number of the enquiries we see have centred on ABS authorisation – from firms at varying stages of maturity, and for varying purposes, including attracting external capital, restructuring ownership ahead of partner retirements, and accommodating non-lawyer stakeholders. We had even been instructed by a private equity house seeking to establish its own SRA-regulated firm to provide legal services directly to its investee companies – a model that illustrates just how far external interest in the legal market has evolved beyond simple investment into law firms.

The structural backdrop: a contracting market in transition

Before examining the specific drivers, it is important to understand the broader landscape in which these changes are occurring. The total number of SRA-regulated law firms has fallen every single year for seven consecutive years – from 10,407 in 2017/18 to 9,147 in 2023/24.  The legal market is not growing in terms of firm numbers; it is consolidating. Firms are merging, being acquired, closing, and restructuring into different legal forms.

Against this backdrop of consolidation, the rise in structural enquiries is not simply about new market entrants. It shows a profession actively reconsidering the vehicles through which it operates. The SRA data makes this shift unmistakably clear.

The incorporated company: the only structure consistently growing

Incorporated companies are the only firm type to have grown consistently across the entire seven-year period, rising from 4,778 in 2017/18 to 5,170 in 2023/24. Every other structure – sole practitioners, traditional partnerships, and LLPs – has declined year on year – without exception. This is a remarkable and consistent trend that points to a fundamental shift in how solicitors want to structure their businesses.

The drivers are well understood. The corporate structure offers tax efficiency, cleaner succession planning, and investment readiness. It allows profits to be retained within the business more flexibly than the LLP model, and it provides a structure that is immediately familiar to investors, lenders, and acquirers. For a generation of senior lawyers increasingly focused on exit planning and growth through acquisition, the limited company model simply fits better.

LLPs: a declining structure under fiscal scrutiny

LLPs have fallen from 1,542 in 2017/18 to 1,450 in 2023/24 – a steady, unbroken decline across every year in the period. This trajectory was already established well before the recent Budget speculation, but that speculation has given it fresh momentum and, more importantly, brought it to the attention of partners who had never previously questioned their firm’s structure.

Ahead of the October 2024 Autumn Budget, intense pre-Budget speculation suggested that Chancellor Rachel Reeves was actively considering applying employer-level National Insurance Contributions to LLP members, a change that would have represented the most significant shift in partnership taxation in decades. Think tank CenTax estimated that imposing employer NIC on partnerships could raise around £2 billion a year, with the average salary of partners in solicitor LLPs put at £316,000. The Law Society treated this as a meaningful threat, warning the Chancellor directly and describing the proposed measure as a misrepresentation of the LLP model, noting that effective tax rates for LLP partners already approach or exceed 50%, and that partner capital is genuinely at risk.

Ultimately, the measure did not appear in the Budget. Reports suggested the Chancellor dropped the plan after Treasury modelling indicated it would cost the government more than it would raise. However, the episode was far from irrelevant. Rumours of a move to close what the Treasury described as a “loophole” had circulated ahead of the previous Budget too, and with ongoing public spending pressures, professional services firms remain firmly in scope for future fiscal reform.

The lesson for law firms is clear: even when a proposed change doesn’t materialise, the threat itself prompts partners to ask fundamental questions about the resilience of their current structure. The enquiries we received during this period were rarely about panic; they were about prudence. If the LLP model could come under this level of scrutiny once, partners reasonably concluded it could happen again.

ABS licences: near-doubling in seven years

Perhaps the most striking data point from the 2023/24 SRA report relates to the growth in Alternative Business Structure licences. The total number of firms holding an ABS licence has grown from 791- representing 8% of all regulated firms in 2017/18, to 1,257, – representing 14% of all regulated firms, in 2023/24. This is a near-doubling in absolute terms over seven years and demonstrates that the ABS model, once seen as a niche or experimental structure, is firmly mainstream.

The data also reveals which firm types are driving this growth. Incorporated companies with an ABS licence have grown from 559 in 2017/18 to 954 in 2023/24, while LLPs with an ABS licence have grown more modestly from 189 to 255 over the same period. Solicitors Regulation Authority This tells an important story: external investment through the ABS route is increasingly flowing into incorporated company structures rather than LLPs, consistent with the broader trend away from partnership models and towards corporate ones.

New firm authorisations and entity changes: recovery and upward trajectory

The picture on new authorisations is more nuanced than a simple “surge”. New firm authorisations peaked at 407 granted in 2021/22, dipped to 321 in 2022/23, and recovered to 356 in 2023/24.  Similarly, applications to change the legal entity of an existing firm fell from 107 in 2021/22 to 80 in 2022/23, before recovering to 89 in 2023/24.

The 2022/23 dip likely reflects the uncertainty of the post-pandemic environment and rising interest rates dampening deal activity. The recovery in 2023/24, combined with the enquiry volumes we are seeing currently, suggests the upward trajectory is continuing, and the fiscal and commercial pressures described in this article provide a clear explanation for why.

Role-holder applications: a leading indicator

One data point from the 2023/24 report that deserves particular attention is the sharp rise in role-holder applications – requests to approve compliance officers, managers, and owners of regulated firms. These rose from 2,268 in 2022/23 to 2,626 in 2023/24, a 16% increase in a single year. This is arguably the most telling indicator of structural activity within existing firms, since every restructuring, change of ownership, or new investment requires role-holder approvals. The jump strongly corroborates the anecdotal picture of increased activity in this space.

Private equity and external investment: an accelerating force

The other major driver of restructuring enquiries is the accelerating interest from external investors in the UK legal market. This is no longer a niche phenomenon. Research by Acquira Professional Services suggests that since 2019, private equity firms have invested over £1 billion into UK law firms, with 2024 representing a record year for such investment. These figures herald a fundamental shift in how the sector is perceived by capital markets: law firms, with their recurring revenue streams and relatively low capital expenditure requirements, are increasingly viewed as attractive investment platforms.

The ABS regime, introduced under the Legal Services Act 2007 and regulated by the SRA, is the primary vehicle through which external investment is chanelled into law firms in England and Wales. It allows non-lawyers to own or manage law firms – but the authorisation process is rigorous and, as many firms have discovered, time-consuming. The SRA must conduct background checks on all individuals with an ownership interest, which in complex fund structures can involve identifying and vetting significant numbers of underlying investors. Firms planning an external investment transaction should factor this lead time into their planning carefully – currently 3 – 4 months (as at February 2026).

Private equity-backed consolidation is already gaining pace, with a growing number of firms adopting a “buy and build” strategy. Process-driven specialisms personal injury, conveyancing, and family law are proving particularly attractive to investors who see technology and AI as levers to improve margins at scale.

International capital: the Gulf dimension and beyond

The international interest we are seeing in investing in, acquiring, or establishing within the UK legal sector extends beyond the UAE, though the Gulf remains the most active source of enquiries in our experience. The underlying appeal is not difficult to understand: English law governs approximately 40% of the world’s cross-border business and financial transactions, and there are already over 200 foreign law firms with offices in the UK, drawn from around 40 jurisdictions. For international investors, an ABS licence offers something beyond a financial return – it provides a strategic foothold within the world’s most internationally influential legal system.

The growing solicitor population: a supply-side driver

One further factor worth noting is the sustained growth in the number of practising solicitors. The number of solicitors holding a practising certificate has grown from 146,625 in 2017/18 to 171,697 in 2023/24, an increase of approximately 17% over seven years. More solicitors, working within fewer but larger firms, creates natural pressure on firm structures, partnership models, and succession planning, and increases the appetite for the kind of external capital that can support growth and facilitate partner exits.

The pros and cons of each structural pathway

For firms considering their options, the choice broadly comes down to three pathways, each with distinct advantages and trade-offs.

Incorporation as a limited company offers tax efficiency, investment readiness, and cleaner succession planning. The corporate structure is familiar to investors and lenders, and it removes the personal liability exposure that, in an LLP, ultimately sits with individual members. The trade-off is cultural: many firms feel that the partnership model is central to how they attract and retain talent, motivate senior lawyers, and manage client relationships. The transition also carries tax implications – transferring assets from an LLP to a limited company is treated as a disposal for capital gains tax purposes, though Incorporation Relief may defer the gain where conditions are met. Professional advice specific to the firm’s circumstances is essential before proceeding.

Seeking an ABS licence allows firms to admit external investment or non-lawyer ownership without necessarily abandoning a partnership or LLP structure entirely. It is the most direct route for firms seeking PE or institutional backing and provides regulatory legitimacy for innovative ownership arrangements. The downside is the authorisation process itself which is demanding, long drawn, and requires a level of transparency about ownership structures and management arrangements that some partners may find uncomfortable. Planning timelines around investment transactions must account for this.

Remaining as an LLP continues to make sense for many firms, particularly those that are profitable, well-governed, and not reliant on external capital for growth. The structure offers flexibility, tax transparency, and an operating culture that many senior lawyers value. The risk, as the Budget speculation demonstrated, is that the tax treatment of LLPs may not remain as favourable indefinitely. Firms that stay in this structure should ensure their partnership agreements, capital contribution policies, and member categorisation are robust enough to withstand HMRC scrutiny under the existing salaried-member rules – and potentially tighter ones in future.

What should firms do now?

The volume of enquiries we are seeing, combined with the structural trends confirmed in the SRA’s own data, suggests that many firms are at a genuine inflection point. The right answer will be different for every firm, depending on size, ownership ambitions, succession timelines, and appetite for external investment. What is clear is that doing nothing and leaving structural decisions to drift is itself a choice, and increasingly a risky one.

Whether the trigger is a desire to attract investment, prepare for a sale, protect partners from future tax risk, or simply modernise an outdated structure, the time to take advice is before a transaction or regulatory change forces the issue. [or for partners looking to retirement].

We would encourage any firm receiving these questions from partners to treat them seriously – and to seek specialist guidance sooner rather than later.

This article is for general information purposes only and does not constitute legal or professional advice. The law and regulatory landscape in this area is evolving, and readers should seek independent advice specific to their circumstances. Information is correct at the time of publication.