In the corporate world, change is constant, especially during periods of economic upheaval. So understanding what general counsel and their in-house legal teams are most concerned about, where their priorities lie and what they are looking for in an external legal adviser – right now – is vital. Law firms must keep abreast of what buyers of legal services are thinking today so that they can anticipate and adapt to their needs.
That’s why each year the Thomson Reuters Institute publishes the State of the UK Legal Market report, based on research among UK-based legal professionals, GCs, and other senior decision-makers within corporate law departments, to deliver that critical insight to help inform strategy and shape decision-making. This year’s report reveals that:
Spending plans are in flux:
During 2023, the proportion of clients planning to increase or decrease their legal spend fluctuated considerably, and while the year ended on a positive note, with nearly 40% of respondents forecasting an uptick, there may be more volatility to come.
On the one hand, GCs remain under intense pressure to contain costs. But on the other, they still need expert legal support, both to mitigate risks and as they seize opportunities. This includes advising on regulatory compliance (which remains a strong source of legal work), meeting high demand for cross-border work, or capitalising on what the report suggests could be a recovery in M&A, corporate and finance activity – and more.
Delivering work more efficiently is therefore key, enabling firms to attract new business and minimise the risk of existing clients taking more work in-house or moving to lower-cost provider. Technology has an essential role to play here, notably in its capacity to automate and streamline manual processes, saving time while enabling lawyers to be more productive and focus on higher value work.
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The state of the UK legal market in 2024 |
Commerciality remains key – but with an emphasis on strategic leadership:
GCs’ top – and growing – priority continues to be its ability to provide commercial advice to the business because they know that, by doing so, they can contribute to achieving the organisation’s goals and support its financial growth. This primary focus on commerciality makes UK corporate clients something of an outlier on the international stage.
While this trend is not new, the report notes that anecdotally, a shift appears to be taking place, in which in-house lawyers are moving away from wanting to be seen as a business partner serving internal clients (with the back-office support role that implies), towards instead being viewed as one of the organisation’s strategic leaders.
Law firms have an opportunity to help in-house legal teams demonstrate how they add value to the wider business. Making their clients look good in the boardroom should also enable firms to develop more strategic, high-value work for themselves.
Risk management and ESG issues rising up the agenda:
Macro-economic uncertainty and increased regulatory complexity have led to a greater focus on risk mitigation for in-house legal teams, and here too, technology is seen as an important tool for analysing and managing risk. Indeed, many UK risk professionals report seeking to automate manual processes, such as by deploying artificial intelligence (AI).
It’s worth noting that environmental, social, and governance (ESG) issues are emerging as a major area of interest, according to UK in-house legal teams. In fact, five times more in-house legal professionals cited ESG as a priority this year than the previous year. What’s more, the report found that UK clients are more likely than the global average to consider some ESG-related issues when hiring outside lawyers.
Technology is a critical differentiator amid the emergence of generative AI:
Clients expect a lot from their law firms. Impeccable specialist and sector expertise must be matched with excellent client knowledge and customer service. As technology develops, it is becoming an increasingly fundamental factor for law firms looking to deliver a top-notch client experience. A large proportion of UK corporate clients say they now take firms’ technology use into account when hiring external legal advisers.
Now, with the advent of generative AI, the possibilities tech offers are greater than ever, enabling legal practitioners, both in house and at law firms, to work at greater speed and scale than before and free up time for more interesting, important work.
Law firms can use generative AI to boost profitability and gain competitive advantage – however, more than one-third of respondents seem to think, mistakenly, that their clients would object to them using it. In reality, we found no evidence of that being the case – although clients did indicate they would like transparency around how it was being used.
Firms also need to be alive to the finding that 85% of UK-based corporate legal respondents say AI will enable a greater proportion of work to be brought in-house over the next five years. To counter that, they will need to be able to demonstrate the value they deliver. They may also need to be open to new pricing structures with tasks charged on a fixed fee basis rather than on a billable hour, using AI themselves to help deliver the necessary efficiency gains to make this profitable.
Being ready to adapt:
The report found that demand is high for UK legal services in many respects. But with clients becoming ever more discerning and cost-conscious, and with technology constantly advancing which could change the way legal professionals work, it pays to recognise what clients value most and be ready to adapt.
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Learn more about the trends changing demand for – and the procurement of – legal services and how legal professionals can turn this to their advantage. Read the full UK State of the Legal Market 2024 report here.
