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Thomson Reuters recently released its annual State of the UK Legal Market 2025 report. As ever, it is an insightful read, although I have to admit that I came to different conclusions to the authors with regards to some of the data, and I found that it was pushing the AI / generative AI narrative heavily, more so than I thought the data necessitated. I also found some of the conclusions and narrative over simplistic. Overall, it remains a good read, particularly for senior leaders of the larger law firms, but there are almost certainly learnings or at least things to chew on in there for all managing partners and directors regardless of firm size.
Where I have disagreed, I’ve tried to include the original data taken from the report, and I’ve given what I hope are well-reasoned, educated justifications!
As ever – you should download and read the Report yourself and come to your own conclusions. You can access it here.
As you’d expect, the report starts with an executive summary which outlines three key points
Firstly, “Productivity and value are top priorities: GCs are increasingly focused on driving efficiency while positioning themselves as strategic partners to the C-suite. As a result, law firms must deliver more than technical advice — they must begin to focus on offering solutions and support that deliver meaningful value to the client rather than on billable hour inputs.
I rather take exception to this point as I think that ‘value’ has always been something that GCs want from their law firms. Certainly, this is not a new point, and I almost feel that ‘it was ever thus’. Furthermore, the second highlighted sentence verges on offensive and again, surely isn’t news!? I just can’t imagine GCs simply accepting and signing off reams of billable hour inputs that don’t deliver meaningful value. But perhaps it’s been too long since I was a lawyer, and this is, in fact, how legal services are currently delivered?
On to the second key point of the executive summary: “Clients seek pricing transparency and flexible structures: Clients are under ever-increasing budgetary pressures, putting a premium on cost certainty. Value-based pricing and alternative fee arrangements are gaining traction, especially in the UK.
Again, exactly what I’d expect. I take a closer look at the report’s data relating to pricing later in the article.
Finally, the report’s third key point as set out in the exec summary: “AI and technology are reshaping resourcing strategies: Corporate legal teams are optimistic about AI’s potential to simplify and streamline processes, prompting them to reassess how — and when — they allocate work to external partners. Law firms and alternative legal service providers (ALSPs) that embrace AI stand to gain a larger share of wallet for cost conscious clients. Long-term growth will hinge on law firms’ ability to evolve alongside their clients. Firms that are willing to adapt their approach by embracing flexible pricing, technology adoption, and client-aligned service-model innovation will be better positioned to capture the opportunities emerging in the UK legal market.”
I’m unsure about this section and I felt that the report in general focussed a lot (too much?) on AI (which I do appreciate represents both a challenge and an opportunity to law firms).
Whilst I agree that technologies will play an important role in the delivery of future legal services, I think it’s a stretch right now to say that the firms / ALSPs that embrace AI will gain a larger share of wallet for cost conscious clients. I think the technology and adoption is still too new to market to really be able to make this call. I’m also not sure that the data in the report backs up this view. More on this point later.
The report was compiled on the basis of research carried out during 2024, which incorporated
That makes 364 responses from the in-house community, and just 77 from law firms, a ratio of 11:52. None of the law firm lawyers were interviewed. I think it’s reasonable therefore to place greater emphasis on the evidence from those that work in-house.
The report starts with a focus on AI and states that “firms that move quickly to harness AI will not only meet client expectations around speed, cost and value, but also stand to differentiate themselves from the competition.”
However, the data states that two-thirds of law firms (50 respondents) will only adopt AI once they see evidence that it has been successfully integrated OR that they are waiting for mainstream adoption with proven results. Furthermore, less than 10% (8 respondents) have any intention of being trailblazers when it comes to identifying new opportunities to utilise and use AI technology.
I think the above is really informative. Although the authors of the report believe that law firms should adopt AI, it seems that the lawyers in private practice who were interviewed don’t share this view. They want to see success in action, of course they do, but lawyers are a cautious bunch. There is always ‘something’ for lawyers to be considering / adopting etc and sometimes a cautious approach can mean you avoid heavy investment in technology or initiatives that don’t always pay dividends, are too early to market to be any good or are simply difficult to use and therefore fall by the wayside.
On the flip side, 30% of law firms (or 23 of the respondents) worry that their AI adoption needs to speed up. Interestingly, we don’t know at what level of seniority the law firm respondents sit. When it’s your cash doing the investing, there’s a fair chance you are less receptive to trialling untested tech.
The in-house lawyers believe that AI could present a potential solution to a lack of time to deliver against their goals, with 41% seeing technology as a way to free up time for complex legal work, 18% believing it will help them better manage large volumes of data and 16% hoping it will help improve efficiency.
My conclusion is that in-house lawyers want anything that will make their life easier, and AI is being sold currently as a panacea for all of our ills – and seemingly theirs. I also think that those in private practice are naturally reticent about being the first mover into significant AI investment and naturally want to see some real-life success stories before backing heavy investment of time and money.
“The increased focus that GCs are placing on efficiency* brings with it a shift in another key mindset: the primacy they place on billable hours and billing rates. While many GCs still rely on the tried and tested measure of billable hours as a way to value work, many others are redefining their view of value in light of their sharpened focus on efficiency. As a result, they are much more focused on the value received for the money they spend. In other words, they are looking at outputs much more than inputs.
“With this new mindset, it will be far more likely for GCs to ponder why a particular outcome costs so much as opposed to why it took so long.”
*Just 16% of respondents according to the report.
I think this is an over-simplification of what is happening. It’s incredibly unlikely that a change of mindset has occurred as quickly as seems to be suggested here. The billable hour isn’t going anyway until value-based pricing and / or other pricing models become the norm.
This will really happen at pace once a tipping point is reached and a majority of law firms adopt it, which seems unlikely to happen for now. Also, it surely remains the case that some work simply isn’t appropriate for value based, fixed fee or retainer based fees? Again, in my experience GC’s are as cautious as lawyers in private practice (possibly more so) and are accordingly likely to apply the ‘Buy IBM’ / belt and braces approach to instructions – an approach we have observed for many years. They still want a safe pair of hands on their work, with bench strength and the reassurance that a global, or at least large UK law firm, can often offer.
“Law firms that proactively adopt and embed AI into their services will be better positioned to meet clients’ expectations, particularly around speed, cost and value. Conversely, bystanders who take a “wait and see” approach will lose ground in the race to deliver efficient, tech-enabled legal support.”
Although I see the logic of this argument, I think that it fails to get to grips with the inherent tension in the relationship between any client and law firm. The client wants to get the job (whatever it is) done at the lowest possible price point, with the best possible service and usually as quickly as possible. The law firm wants to deliver the work as cheaply as possible, generating the highest profits and probably also as quickly as possible so that they can move onto the next project.
The risk for lawyers with taking the above approach as recommended by the authors, is that it puts their fee income at risk, at least in the short term. It also requires capital investment in terms of cash and time and least, an element of difficult-to-calculate, risk.
So, there’s a gamble being played out within the law firms – move too quickly, and take all the risk. Move too slowly and potentially miss out to the competition. Stay where you are though, and continue to bill well, and wait to see who moves first. The market is operating as an oligopoly. I suspect the authors either don’t realise this or think that law firms have endlessly deep pockets to trial a technology that is both fast-moving and relatively untested in this market.
My conclusion is that the authors are pushing AI as a panacea, despite the data from those surveyed not really backing up this position. Alternatively, or in addition, the authors don’t quite understand the nuances of the UK legal market.
The next section of the report deals with additional requirements of today’s GC.
“Today’s corporate clients say they want tailored guidance that is grounded in industry expertise and aligned with their company’s broader strategic goals. Solid technical advice is no longer enough.”
“As corporate clients push for greater efficiency, they are also raising expectations around the quality of advice they receive. In an environment where technology is handling more routine tasks, law firms can elevate their value proposition by offering high-quality, business-aligned advice.”
“Corporate legal teams are increasingly focused on positioning themselves as trusted strategic advisors to their C-suite, and many are looking to law firms to help support this evolution. GCs report that they appreciate law firms that are proactive, communicative and responsive, even during holidays. At the same time, corporate legal teams place more trust in firms with strong reputations and deep industry knowledge that can help them drive strategic discussions with their organisation’s leaders.”
I’m not sure that any of the above is really news is it? We know that GCs want a place at the table and ‘commercial awareness’ is a catch phrase so deeply ingrained that even law school students know about it and wang on about at interview ad nauseam.
What is interesting about the above is the focus upon ‘strong reputations’ and ‘deep industry knowledge’, and although the data regarding those statements hasn’t been made available within the report, I can only agree with the sentiment. The correlation made between strong reputation and increased trust should certainly be noted, and I for one, would love to see the raw data that has led to that conclusion.
“Publishing thought leadership content and providing training sessions and informational resources reinforce a law firm’s expertise while offering value that extends beyond individual matters or engagements. Finally, GCs emphasise the importance of simplifying complex legal advice into clear, non-technical language, making it actionable for business leaders and stakeholders without legal backgrounds.
“Law firms can differentiate themselves by cutting through the complexity to deliver advice that is both practical and accessible.”
Again the above is great marketing advice and it’s only a shame that no data is provided in order to understand its origins.
My conclusion: this section contains more sweeping, generalist statements but some absolute nuggets in terms of the value that law firms can add to GC clients via low-cost marketing tactics. Was the report written by a PR and marketing agency? Perhaps.
28% of UK-based legal departments are planning to reduce their legal spend in 2025, up from 22% in 2024 and 24% in 2023. Interestingly, Anticipated Spend Outlook in the UK by practice areas increased the most in Regulatory (+31), Corporate (+13) and M&A (+5), whereas spend drops in IP (-5) and Insurance (-3). Spend across global companies of $1bn+ increases in all categories apart from Banking and Finance which remained the same. Anticipated Spend for USA companies increased in all areas.
Another really interesting figure is that 39% of external legal spend for UK-based businesses is allocated to international work – and the report rightly points out that this is an opportunity for law firms to develop either ‘best friends’ relationships or work with international referring organisations.
Going back to AI again…
“As AI adoption accelerates, clients expect those cost savings and productivity gains to be passed along. For law firms, this means rethinking the value they provide — not based on time spent, but on outcomes delivered. Billing models that reward efficiency, transparency and results will likely gain traction in a technology-enabled market. This moment presents a strategic opening. Law firms that act early can help define and shape the new pricing landscape. By leading the way with creative, client-aligned fee structures, these firms can set the benchmark for value and solidify their positions as forward-thinking partners in an evolving legal landscape.”
The above is potentially true but it’s important to remember that law firms are in the business of making money. This goes to the heart of the conflict between client and law firm interests, as I outlined earlier. The real challenge therefore, is not the identification and rolling out of technologies powered by AI alone, but finding a way of doing so whilst protecting profits. And therein lies the conflict. Firms want to look after their clients and provide best in show legal work – but they also rightly want to be paid appropriately for it. Who will move first and how will they do so profitably?
32% UK businesses surveyed had a high desire for value-based billing. 26% medium desire, 7% didn’t know and 25% had a low desire. I’m particularly interested in the 25% that aren’t interested in the pricing model – why not, have they tried it? Did it not work? Are they happy with the value they get from hourly rate or current retainer arrangements?
“64% of corporate legal teams and 58% of law firms anticipate a smaller proportion of hourly billing within 5 years.” The report claims this is as a result of AI impact, but it’s not clear how this was measured / determined by the report.
“3 in 10 believe that the onus is on law firms to develop the model for alternatives to the billable hour.” If the report is to be believed, and GC’s are ready and excited about moving on from the billable hour, I find this statistic surprising. I would have expected the 3 to be closer to 5 or even 7 or 8.
My conclusion: I think that, again, this section relies a bit on conjecture with regard to AI adoption and pricing models. I don’t think that the majority of law firms are ‘ready to move at pace’ with regards to AI adoption in ways that will immediately benefit clients. The insights on pricing are interesting, but the stats don’t suggest a clear route or even desire to move on quickly and wholeheartedly from hourly billing. As ever, it’s important to note the nuances in what the data tells us.
“UK corporate legal departments are re-evaluating the volume of work they outsource to law firms. Over half (54%) expect to bring more legal work in-house over the next five years. Law firms, however, appear to underestimate this trend: Only 35% of firms anticipate their clients will increase the proportion of work they keep in-house, and 16% are unsure of which direction the winds are blowing.
“Taken together, these findings highlight a need for law firms to consider new ways to demonstrate and deliver value to their clients. This could mean exploring flexible resourcing models and focusing on specialised, high-value services that complement clients’ growing internal capabilities. Alternatively, it could mean structuring some of the firm’s less core service offerings to more closely mimic the reasons clients seek to bring work in-house — more favourable cost structures and deeper knowledge of the business, paired with the deep bench of expertise that makes outside law firms appealing. Rather than seeing these trends as a threat, law firms can reframe them as an opportunity to serve clients in new ways — offering strategic advisory services, embedded counsel or secondment options, or modular and on-demand legal support that align with clients’ evolving needs.”
I think the above is probably correct in the sense that it is sensible where some work is being taken in-house to look to create more bespoke, highly priced strategic services that can be delivered alongside an in-house provision. However, as ever, the challenge will be selling the value of such products where a client is making moves to reduce spend. Flexible pricing options are also surely a consideration in these conditions. Law firms will however, need to resist the temptation to race to the bottom in order to keep the client.
My conclusion: Rarely, if ever, do things seem to change in this market. In-house teams are always pressed for budget (isn’t every support function in every business?) and are always planning to spend less.
Do they actually spend less though? That is probably a key question for future research, as with the best will in the world, sh*t happens in business, and when it does – most of us pick up the phone to our lawyers. Don’t we?
“The UK legal market is at an inflection point. As corporate legal departments face growing pressure to deliver more value with fewer resources, law firms must recognise and adapt to new realities of the sector. Success in this shifting landscape will rely on firms’ ability to meet changing client expectations by:
“1. Delivering client-aligned value: Amid economic uncertainty and the rise of AI, clients are looking to law firms to help them achieve their efficiency goals and position themselves as strategic enablers of the business.
“2. Adapting to new budget realities: With tighter spend outlooks, clients are more likely to seek out alternative billing models that offer predictability, transparency and outcome-based value.
“3. Embracing new delivery models: As UK legal departments bring more work in-house and expand their use of ALSPs, law firms must offer more flexible, tech-enabled service models that complement clients’ evolving needs. The law firms that thrive will be those that embrace change rather than resist it, balancing profitability with innovation and client-centric strategies to deliver meaningful value in an increasingly competitive market.”
As ever, any research-led report into the UK legal market has value, and I try to read as many as I can. My issue with this report is an over-reliance (in my view) on insights relating to AI. Yes – it’s important, yes – it’s here and yes – it’s almost certainly going to have an influence on the market. Yes – we need to acknowledge all of the above. But I also think we need to acknowledge that if it is having an effect already, that fact doesn’t necessarily appear to be reflected in the results derived from this report.
My second issue is the authors’ tendency to make sweeping statements that I don’t see reflected in the data. I’d like to see the statistics backing these up, or at the very least understand who the authors are in order to understand their credibility in making them.
Other than these complaints, there is value to be had in this report and the statistics and data provided are insightful. In future editions, I’d love to see a more detailed breakdown of the outputs from the research.
If you enjoyed this review or it gave you pause for thought, you might also like to read my review of the LexisNexis Bellwether Report 2024: The LexisNexis Bellwether Report 2024 Top Takeaways.
And if you are thinking about whether now is the time to think strategically about your law firm’s approach to market and you’d like to have a chat – book a call with me now.
Victoria Moffatt is the founder and managing director of LexRex.
A non-practising solicitor she has been supporting law firms with their PR for over a decade. Get in touch with Victoria to discuss your law firm’s PR needs.
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