Businesses rethink legal strategy as costs of lawyers surge
An increasing amount of legal work will be handled by in-house teams rather than external lawyers within the next five years as cost pressures force businesses to reassess their legal strategies, according to new data.
New research from Thomson Reuters, exclusively shared with City AM, reveals that over half (54 per cent) of UK in-house lawyers anticipate that more work will be done internally.
This feeling has even spread to law firms, as the report noted that over one-third (35 per cent) of UK law firms expect to see more work from staying in corporate legal departments.
John Shatwell, head of legal professionals Europe at Thomson Reuters, said: “A growing number of general counsels are feeling pressure to bring external costs down.
“For many of them, this will mean bringing more legal work in-house. They are also hoping that the use of GenAI will allow their external law firms to reduce their fees.”
Employment reforms impact on lawyers’ costs
While senior lawyers in businesses face pressure to cut legal spending, government reforms have meant that companies have had to pick up the phone to consult specialist lawyers.
A net 10 per cent of respondents said they expect to increase their spending on employment law advice as the highly contentious package of employment reforms is debated in Parliament.
Employment lawyers have been in high demand ever since the Employment Rights Bill was announced in the Autumn Budget, to such an extent that a recruitment report revealed employment law vacancies rose by nearly 34 per cent over 2024.
For legal work sent out to firms, there is a widely anticipated feeling general counsels (64 per cent) and law firms (58 per cent) are foreseeing a move away from the hourly rate.
Law firms have traditionally used the billable hour system to calculate their charges. It does what it says on the tin: The firms bill the total hours their lawyers work on a client’s case.
However, with the increased usage of AI at firms, clients are pushing to see this affect the price.
Shatwell added: “Lawyers and clients alike are keenly aware that new GenAI tools will shift costs and increase productivity.”
“Clients continue to expect high-level strategic counsel from their law firms but also want to see any productivity savings passed onto them – this will primarily happen through a shift to value-based billing,” he said.