The legal services sector grew from a value of £41.4 billion in 2021 to £52.3 billion by 2024. Private equity investment in the sector has increased significantly, climbing by 42% from £377 million in 2023 and reaching £1.2 billion over the last five years. Satisfaction in the delivery of legal services is improving, as the market has seen investment in people and technology yield results.
But there remain issues around public confidence, particularly in the wake of Axiom Ince and SSB Group, meeting unmet legal needs, and diversity in the profession, according to a ‘state of the nation’ report from super-regulator the Legal Services Board (LSB).
In the State of Legal Services 2026, the LSB outlines progress against its 10-year Reshaping Legal Services strategy, launched in 2021. The interim report suggests that while the legal sector is growing, challenges around regulation and delivery remain. The report identifies three areas of focus for the LSB: fairer outcomes, stronger confidence and better services.
One challenge which will resonate with many in the profession is the investment in technology, which has seen a 67% increase in funding and now exceeds £1.7 billion. Two-thirds of the growth has been concentrated in business-to-business solutions, but the use of AI and business-to-consumer lawtech is expanding, reflecting a change in consumer behaviour that has seen a 4% increase in the use of online services for legal advice and information since 2019.
Like many regulators, the LSB recognises AI comes with both opportunity and risk. The publication of the report coincides with the organisation’s consultation on its draft business plan and budget for 2026/27, which suggests a voluntary standard for the use of legal tools that use artificial intelligence (AI). This would seek to support high-quality, responsible innovation, while helping consumers to make informed decisions about the suitability and risks of these services.
The State of Legal Services report is also critical of largely static statistics which show one in three people experience unmet legal needs that can result in serious consequences, from housing insecurity to financial stress and family breakdown. Cost, court delays, legal aid and accessibility of legal services are all identified as key factors in reducing unmet legal need, which the report notes is “critical if the sector is to make meaningful progress towards achieving fairer outcomes, especially for those experiencing greater disadvantage or who are in vulnerable circumstances.”
On building stronger confidence in the profession, the LSB acknowledges the impact of the Post Office Horizon IT scandal, Axiom Ince and SSB Group failures on consumer confidence, while also highlighting the increasing number of complaints firms received as evidence of the need to improve complaints handling. The report notes:
“As frontline regulators take steps to comply with our requirements, statutory guidance, and statement of policy on first-tier complaints issued in 2024, we expect to see a step-change in the effectiveness of first-tier complaints handling.”
Summarising the report and draft business plan, Richard Orpin, interim chief executive of the LSB, said:
“In 2026/27, we want to make sure that the regulatory framework continues to support and enable economic growth, while protecting consumers from harm. We will focus our efforts on where they can have the greatest impact for consumers while delivering value-for-money for the sector. This is accompanied by a reduction in our draft budget.
“Our new State of Legal Services report provides the big picture against which to consider the proposals in our draft business plan. It shows where we and the frontline regulators have acted to empower and protect consumers, but it also shows new and ongoing challenges for the sector. It demonstrates the continued need for independent and evidence-based regulation, subject to effective oversight. This will be crucial for reshaping legal services to better meet society’s needs and crucial for the sector to continue to drive economic growth.”
The LSB will host an online event on 13 January 2026 to discuss the draft business plan and budget in more detail. Book your place here.
The consultation will close at noon on 11 February 2026.
Legal Services Board: Consultation on policy statement on ‘Encouraging a diverse legal profession’
