Alternative legal services firms which operate consultancy models, such as Keystone Law, are growing at a rate three times that of their mid-market rivals, fresh research shows.
Analysis by Arden Partners, which looks at publicly available data between 2018 and 2020, reveals that consultant lawyer numbers have grown at a compound annual growth rate (CAGR) of 21%. The figure for mid-market law firms is just 7%.
As part of the research, Arden analysed what it refer to as the ‘leaders’ in the legal consultancy space, identifying Keystone Law, Gunnercooke, Taylor Rose MW and Setfords.
These firms were then compared against 185 law firms – which Arden defines as the ‘legal mid-market’.
The research found that firms employing a consultancy model have also grown their revenues faster than the mid-market, as well as their headcounts. Revenues among the legal consultants have grown at a two-year CAGR of 26%, compared to just 10% for the legal mid-market.
Arden argues that its findings point to ‘accelerating market disruption’ led by legal consultants, and that the consultancy model has gained acceptance from lawyers, clients and financial investors, becoming much more mainstream in the process.
Last year, Arden’s head of business services, John Llewellyn-Lloyd, wrote an article for Law.com arguing that within five years, up to a third of all U.K. lawyers could be working under a consultant model.
The strong financial results posted last year by Keystone is an indicator of the kind of success identified by Arden. Its full year results for the year ended January 31, 2021, showed a 10.9% jump in revenues – up to £55 million from £49.6 million the previous year. The firm also added 58 ‘senior lawyers’ to its ranks, as well as increasing its ‘junior lawyer’ bench from 54 to 74.
Commenting on Arden’s research, Llewellyn-Lloyd said that he expected the growth of legal consultancies to accelerate further as more financial data becomes available in the coming months.
The Big Four have sought to capitalise on the growth of legal consultancy work, with Philip Goodstone, EY’s head of law for the U.K. and Ireland, saying earlier this year that consulting work enables the firm to have “different sorts of conversations” with clients.
Earlier this year, Gunnercooke announced that its clients would be able to pay for legal and professional services using cryptocurrencies, such as bitcoin or ether.