May 2026 Legal Market Roundup: Consolidation, New Models and Growing Strategic Pressure

May has reinforced a trend that has been building across the legal market for some time: the sector is evolving quickly, but not evenly.

Large, well-funded firms continue expanding through acquisitions and recruitment, while alternative business models and external investment are becoming increasingly mainstream. At the same time, rising compliance costs, operational pressures and tighter margins are forcing many firms to think carefully about where they invest and what they continue to do.

The legal market is no longer changing only through mergers — it is changing through ownership models, technology, recruitment strategy and firms making deliberate decisions about where they see long-term value.

Consolidation Continues Across the PI Market

The personal injury sector continued to consolidate throughout May.

Fletchers strengthens its serious injury team

One of the month’s biggest stories came from Fletchers Group, which recruited a specialist serious injury team from Slater and Gordon, adding around 20 lawyers and support staff to its growing claimant practice.

The move continues Fletchers’ aggressive expansion strategy and highlights how PE-backed firms are increasingly focusing on higher-value, specialist work rather than pure volume claims.

At the same time, the wider PI market continues to shrink as larger firms absorb smaller competitors and specialist teams.

For smaller and mid-sized claimant firms, competing against larger, well-capitalised operators is becoming increasingly difficult. Marketing costs, compliance requirements, staffing pressures and operational infrastructure all now favour firms with greater scale.

As a result, many firms are quietly reassessing whether certain work types remain commercially worthwhile long-term.

Fee-Share Firms Continue to Grow

May also saw further growth in consultant-led and fee-share models.

Legal Futures reported that Lawhive has effectively become part of the profession’s “Big Five” fee-share firms after rapid expansion over the past year.

Meanwhile, Setfords made headlines by opting to remain family-owned rather than taking private equity investment, despite exploring outside funding options.

Together, these stories show how mainstream alternative legal business models have become.

More lawyers are being attracted to:

• flexible working structures
• consultant models
• reduced bureaucracy
• and greater autonomy

For traditional firms, particularly regional practices, retaining experienced fee earners is becoming increasingly challenging.

Private Equity and External Investment Continue to Expand

Private equity activity remained strong throughout May, with further PE-backed legal deals reported across the Midlands, Manchester and wider regional markets.

At the same time, AIM-listed professional services group DSW Capital launched a dedicated legal brand following the success of its earlier law firm acquisition.

This reflects a broader market shift: legal services are increasingly becoming part of larger professional services platforms rather than standalone traditional firms.

The lines between legal, consultancy and advisory services continue to blur.

The SRA Budget Proposal Raises Concerns

One of the profession’s biggest talking points this month was the reaction to the SRA’s proposed budget increase.

Many firms expressed concern about the cumulative impact of:

• rising practising certificate fees
• increased compliance costs
• AML obligations
• higher insurance premiums
• and growing technology investment requirements

For smaller firms and volume practices operating on tighter margins, these pressures are becoming harder to absorb.

The wider concern is that rising regulatory costs may accelerate consolidation even further.

Mazur Still Influences Operational Decisions

Although the Court of Appeal overturned the original Mazur ruling at the end of March, its impact is still being felt operationally.

The appeal restored clarity by confirming that supervised delegation remains lawful and that non-authorised staff can continue conducting litigation work under proper supervision.

However, the case has permanently increased focus on:

• supervision structures
• file ownership
• operational governance
• and documentation of responsibility

Many firms are now reviewing whether their staffing and supervision models are genuinely robust enough to withstand scrutiny.

For some, that means tightening processes. For others, it has accelerated wider conversations about departmental viability and long-term sustainability.

 

The Market is Becoming More Strategic

Perhaps the clearest theme running through May is that firms are becoming more deliberate in their decision-making.

Firms are increasingly asking:

• Which departments genuinely fit the future of the business?
• Where should investment go?
• Which areas create disproportionate risk or operational pressure?
• And what no longer makes commercial sense?

That is why the market is seeing:

• more acquisitions
• more restructuring
• more external investment
• and more planned exits from specific practice areas

Importantly, these are not always distress decisions. In many cases, they are proactive strategic choices.

Where Recovery First Fits

This changing environment is exactly where Recovery First becomes increasingly relevant.

Not every firm wants external investment.
Not every department should continue indefinitely.
And not every strategic withdrawal is a sign of failure.

In many cases, stepping away from a practice area before profitability, operational strain or compliance risk becomes unmanageable is simply good business.

Recovery First supports firms looking to:

• withdraw from specific areas of work
• reduce exposure to high-risk or low-margin work
• manage succession issues
• restructure around stronger practice areas
• or exit the market in a controlled and compliant way

Through a structured, panel-based transfer process, firms can:

• maximise WIP recovery
• reduce successor practice exposure
• protect clients and continuity of service
• and preserve reputation during transition

As May has shown once again, the firms navigating change best are rarely the ones avoiding difficult decisions; they are the firms making those decisions early and managing them properly.