UK law firms find themselves working to serve clients whose interests are shifting toward value and efficiency while simultaneously needing to meet the challenges posed by macroeconomic uncertainty and rapid technological advancements
Widespread macroeconomic uncertainty and rapid technological advancements are driving significant changes in the legal market in the United Kingdom in the early part of 2025.
A new report from the Thomson Reuters Institute, State of the UK Legal Market 2025, provides a comprehensive analysis of these changes and offers valuable insights for UK law firms and corporate legal departments alike. Many of the findings from the report underscore that law firm leaders should place a strong emphasis on adapting to these evolving dynamics.
Emphasis on value & efficiency
One of the most prominent themes in the report — compiled from a variety of primary research projects conducted by the Thomson Reuters Institute throughout 2024 and consisting of interviews with more than 450 UK-based corporate general counsel (GCs), corporate legal professionals, and UK law firm lawyers — is the shift towards value and efficiency.
The report shows that GCs at UK-based companies are increasingly focused on driving productivity and positioning themselves as strategic partners to the C-Suite. This means that their outside law firms must go beyond simply providing technically sound advice and start offering solutions that deliver meaningful value. As this focus on value sharpens, the traditional billable hour model is being scrutinized as clients seek more transparent and flexible pricing structures. Today’s GCs are expressing ever greater interest in value-based pricing and alternative fee arrangements.
The report also highlights the transformative impact of AI and technology on the legal industry. Corporate legal teams are optimistic about AI’s potential to simplify and streamline processes, prompting a reassessment of how and when they allocate work to outside legal service firms. Clearly, those law firms and alternative legal services providers (ALSPs) that embrace AI stand to gain a larger share of the market by offering cost-effective solutions to budget-conscious clients. The ability to leverage technology to boost productivity and drive efficiency is becoming a critical differentiator in the legal market.
Clients are under increasing budgetary pressures, which is driving a demand for cost certainty, further feeding the desire for value-based services. Clients are looking for law firms that can provide tailored guidance grounded in industry expertise and aligned with clients’ broader strategic goals. This means that law firms need to be proactive, communicative, and responsive, doubling down on efforts that many firms have been pushing for years.
The shift towards in-house work
Another significant trend identified in the report is the shift towards bringing more legal work in-house. More than half of respondents from UK corporate legal departments said their departments expect to increase the volume of work they handle internally over the next five years, driven by the need to meet tighter budgets, advances in AI and technology, and a focus on expanding internal capabilities. Outside law firms must adapt by offering innovative service models that align with the evolving expectations of today’s legal departments.
Not surprisingly, ALSPs are emerging as key players in the UK legal market. Their value proposition includes specialized expertise, tech-enabled cost efficiency, and the ability to manage high-volume tasks at scale. They can also leverage different areas of expertise than those demonstrated by traditional law firms. UK corporate legal departments are leading the way in ALSP adoption globally, the survey shows, with 65% of departments already working with firm-affiliated or independent ALSPs. This trend presents both a challenge and an opportunity for traditional law firms, which must find ways to collaborate with ALSPs to deliver integrated, cost-effective solutions.
Conclusion
UK-based Law firms that are willing to adapt their approach to the practice of law and client-service delivery 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.
However, those law firms that do not respond to today’s increasing pressures may find themselves quickly at risk of losing market share to other law firms that are taking a more proactive approach, ALSPs that are finding new and innovative ways to compete, or even to the in-house legal teams of the very clients they are hoping to serve.
To read more about these insights and explore the full range of findings, download the “State of the UK Legal Market 2025” report by filling out the form below:
